Hancock, Bancorpsouth, Trustmark hold solid against the tide
U.S. stocks are expected to turn sharply lower for the second straight day Friday, as investors remain jittery about President Obama’s new bank plan, which seeks to prohibit banks from owning hedge and private equity funds.
Shares endured a second day of heavy losses, pushing them back to December levels after the president’s proposal to curb the size of banks and limit certain investment strategies.
As a result, banking stocks tumbled, with the Dow falling 213.27 points, the S&P 500 fell 21.56 points and the Nasdaq dropping 25.55 points. Goldman Sachs, which reported profit earlier Thursday, was down 4.12 percent.
“While the financial system is far stronger today than it was a year ago, it’s still operating under the same rules that led to its near collapse,” Obama said during his address about the plan Thursday. “That’s why we are seeking reforms to protect consumers.”
BancorpSouth CEO Aubrey Patterson says the proposal in a mix of political strategy and policy making.
“It is my view that we would be better off to focus on the development of good national policy on regulatory reform, as is being developed through the legislative process with all parties participating,” he said.
Locally, however, Thursday stock quotes for BancorpSouth, Hancock and Trustmark actually rose slightly, although Bancorpsouth was down a dollar a share Friday morning.
Paul Guichet, vice president for investor relations for Hancock Bank, said his institution is still evaluating the president’s proposal.
“At first glance, I believe the bank plan is aimed at the large, money center banks on Wall Street,” he said. “It’s aimed at curbing trading practices and risky banking activities that helped precipitate the financial crisis.”
Yesterday’s slight rise in Hancock and the other two Mississippi-based banks’ stock is a testament to the way business is conducted at those financial institutions, Guichet said.
“Hancock, Trustmark and BancorpSouth did not get involved in high-risk loans and other risky activity,” he said. “Our banks stick to the fundamentals of banking and Wall Street rewards banks like ours that do things right.”
Belhaven College School of Business dean Chip Mason agrees with Guichet’s assessment.
“Those banks have very sound banking practices and are smaller than the larger banks which will be affected more,” he said. “I think Obama blames the recession on the banks but there’s a lot more to it than that. The basic premise (of the plan) is good and I believe you will see some moderate Republicans like John McCain support it.”
Stocks on Wall Street suffered their worst day in months on Thursday after the Obama administration announced the proposal. In addition, worries about China’s lending practives and reports showing a rise in jobless claims and a drop in manufacturing added to the pressure.
Obama’s proposed new bank rules are feeding into investors’ anxiety, said Peter Cardillo, chief market economist for Avalon Partners.
“The market is going to try and stabilize after yesterday’s decline, but there’s a lot of negative talk out there,” he said. “The best we can hope for is a mixed session as the market focuses on the future of banks.”
Earlier Thursday, the market was mixed as good earnings news was tempered by an unexpected jump in initial jobless claims. But banks, which have driven the market over the past year and a half, were the focus by late morning.