What is the problem of American banks?

The KBW Nasdaq Bank index in May fell by 7.5%, while the S&P500 index fell by only 5.5%. This dynamic shows: over the past month, the shares of large American banks have fallen more than the market as a whole. Paper Wells Fargo in May fell by 6.1%, JPMorgan Chase and Bank of America lost 6.7% and 9.3% respectively.
Some analysts see the reason for the decline in stock prices of banks in a sharp drop in government bond yields. The fact is that in recent days, the yield on ten-year US Treasury bonds has dropped to its lowest level since September 2017.
Falling interest rates reduce the difference between what banks take from borrowers and what they pay to depositors. This difference is the net interest margin. Its reduction reduces the income of banks.
Instability in the stock market can be beneficial to banks because it stimulates stock trading. And this leads to an increase in bank income. Activity on the stock market has declined in the past few weeks. According to the Dow Jones Market Data Group, since the beginning of April, trading in stocks has fallen by about 10% compared with the previous quarter.
Another source of banking income is the activity of the debt capital market. It is likely to be lower at the end of the second quarter than in the first quarter. This trend is observed despite the fact that, due to several large IPOs, the capital market will increase compared with the previous quarter.
True, analysts believe that this situation in the market may be short-lived and the shares of large banks this year are still strong. If we consider not the May dynamics, but the data from the beginning of 2019, it turns out that the KBW Nasdaq Bank index has risen by 10% - slightly lower than the growth of the S&P500 index over the same period by 11%.
Analysts say: such large banks as Wells Fargo and JPMorgan Chase, lower key US will benefit. These banks benefit from the scale and in recent years have been winning in the struggle for the consolidation of deposits. Analysts argue that these banks are now bargaining at a higher discount to the market than usual.

The information above cannot be considered as an investment advice and past results do not indicate future performance.
**Investors should have experience and understand the risks of losing all the initial investment.
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