Bank stocks fell Friday as investors nervously anticipated the government's release of stress test results for the country's 19 largest financial companies.
The KBW Bank Index fell 2.01%, ending the week off 7%.
The Treasury Department, the Federal Reserve Board and the companies being tested will jointly release the test results May 7, according to a government official. Federal regulators had originally been expected to issue the results on Monday.
"The market is looking ahead with some uncertainty that comes with the release, but bank stocks are not down horribly, so the anxiety levels aren't too high," said Gary Townsend, the CEO of Hill-Townsend Capital LLC.
Scott Anderson, a senior economist at Wells Fargo & Co., wrote in a note Friday that the release of the government's stress test results has the "potential to trigger another financial shock of its own." Such a shock could hurt investor sentiment and the timing and strength of economic recovery.
"Depending on which banks fail to meet the government's arbitrary standards and scenarios, their stock and bonds could be punished by investors," Anderson wrote. "Also, given the fact that banks, in many cases, are disputing the government's results, the entire exercise could end up adding to investor confusion and fear, instead of producing financial transparency and stability."
Decliners Friday included Bank of America Corp., off 2.6%; JPMorgan Chase & Co., 1.6%; Wells, 2%; PNC Financial Services Group Inc., 4.7%; U.S. Bancorp, 1.4%, and Citigroup Inc., down 5 cents a share, to $3.
Citi said Friday that it is selling its Japanese domestic securities business to Sumitomo Mitsui Financial Group in a deal with a total cash value of $7.9 billion.
The banking company said it expects to generate about $2.5 billion — or 26 basis points — of tangible common equity from the sale but will book an after-tax loss of roughly $200 million.
Among the regional banking companies, SunTrust Banks Inc. fell 4.4%, KeyCorp 4.2%, Zions Bancorp. 2.3% and Fifth Third Bancorp 25 cents, to $3.85 a share.
Analysts at JPMorgan Chase on Friday cut their 2009 and 2010 earnings estimates for B of A, Citi, SunTrust, Wells and U.S. Bancorp. They reduced their 2009 loss estimate for Fifth Third but raised the 2010 estimate for the Cincinnati company.
Gainers Friday included Capital One Financial Corp., up 3.6%; Bank of New York Mellon Corp., 1.7%, and State Street Corp., 0.6%.
The broader market averages closed in positive territory. Both the Dow Jones industrial average and the Standard & Poor's 500 index were up 0.54%.