The median U.S. banking stock is down close to 30% on the year.
The coronavirus has slammed bank earnings. There’s obviously the rising risk of loan losses as consumers and businesses deal with lockdowns and increasingly unemployment. Worse, falling interest rates due to the economic slowdown are pressuring bank results going forward.
Warren Buffett recently bought another 34 million shares of Bank of America (NYSE:BAC) stock. This brings Berkshire’s stake in Bank of America to 11.3% of the company. Bank of America is Berkshire’s second-largest stock position, with a total market value of $23.9 billion.
The Federal Reserve took a tougher-than-expected stance on banks’ shareholder payouts in its latest round of stress testing. While the Fed found that most banks would remain well capitalized if U.S. economic growth rebounds, many would see their capital buffers thinned out by loan losses under the potential worst-case scenario caused by the coronavirus pandemic. To help preserve capital, officials on the Board of Governors decided in a 4-to-1 vote to suspend banks’ share buybacks through the third quarter and cap their dividend payouts.
Nela Richardson, principal and investment strategist for Edward Jones, joins “Squawk Box” to discuss earnings season so far as well as how she sees the bank sector’s role in helping revive the economy.