Several U.S. financial stocks including US Bancorp, American International Group and Fifth-Third Bancorp overcame weakness in the banking sector on Tuesday to close slightly higher, despite cautionary notes from analysts at both JP Morgan and Citigroup.
JP Morgan decreased its predicted earnings for some large cap banks on Tuesday and that the major banks are also trimming their lending activities and boosting their cash reserves to cover lingering credit losses. The firm raised its estimates for U.S. Bancorp to better reflect the company’s revenue, as well as benefits from acquisitions of small companies in recent months and to reflect its recent gains in mortgage banking. As a result, US Bancorp’s stock was up by 2.8% for the day.
Analysts at Citigroup on Tuesday also decided to weigh in on financial stocks. Although Citi analysts downgraded some firms, they upgraded Fifth-Third Bancorp saying that the firm was undervalued, leading it to a 1.28% gain for the day. BB&T also benefited from Citigroup’s report, and had a 1.56% gain for the day.
American International Group (AIG) shares closed up 8.6% on the day because it had finalized two transactions with the New York Federal reserve that will reduce its government debt by $25 billion. With this reduction, AIG’s outstanding debt with the New York Fed is now at just $17 billion. AIG said that it will move some of its holdings into its American International Assurance Company unit and its American Life Insurance Company unit as special vehicles that will position the units for IPOs or third-party sales in hopes of bringing in additional capital and paying off its federal debt.
