Bank Stocks Slide as Money-Center Names Lead Financials Lower: Citigroup Falls 4%, Bank of America Drops 3%, JPMorgan Chase Slips

Selling across financial stocks is landing hardest on some of the biggest U.S. banks, and Citigroup (NYSE:C | C Price Prediction) shares are leading the money-center names lower as traders pull back from the group. Citigroup stock is down 4% to $123.81, posting the largest decline among the large banks.

Meanwhile, Bank of America (NYSE:BAC) stock is down 3% to $53.07, a smaller drop than Citigroup stock is posting despite a fresh legal headline from the Merrill Lynch unit. JPMorgan Chase (NYSE:JPM) stock is down 0.9% to $327.81, the smallest pullback of the three and a sign that sellers are drawing clear lines between the biggest banks.

Meanwhile, the Financial Select Sector SPDR ETF (NYSEARCA:XLF) is down 0.99% to $52.87, a smaller decline than Citigroup and Bank of America shares are showing. The SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is down 0.3% to $760.54, so equities overall are seeing only a modest pullback.

Merrill Lynch Settlement Lands at Bank of America

Bank of America’s Merrill Lynch unit will pay $39 million to settle a class action over cash sweep accounts, Reuters reported. Settlement papers were filed late Wednesday in Manhattan federal court, and the case centered on idle retirement cash that customers stated Merrill Lynch swept into deposit accounts paying very little interest. Approval from U.S. District Judge Valerie Caproni is still required, and the agreement avoids a trial that had been set for mid-October.

For Bank of America, the payment is a small sum next to the scale of the bank’s operations, and the agreement removes trial risk from the company’s legal calendar. Because the class action was already public, the deal adds no surprise expense. That makes the settlement a thin explanation for the 3% slide in Bank of America stock, and the Merrill Lynch news says nothing about the largest drop in Citigroup stock.

Citigroup’s Steeper Slide Points to Positioning

Citigroup stock is falling harder than Bank of America stock, even though the only company-specific legal headline in the group involves the Merrill Lynch unit. This pattern points to positioning across the large banks as the main force behind the slide in Citigroup stock, since the settlement explains little of the gap between the two lenders.

JPMorgan Chase stock is holding up best of the three, with a 0.9% decline that’s slightly smaller than the 0.99% drop in the industry ETF. The distance between JPMorgan Chase stock and Citigroup stock shows sellers discriminating between names, with Bank of America shares landing in the middle.

What to Watch Next

Whether Citigroup stock holds above $124 or keeps leading the money-center group lower is worth watching, since that answer could show if the positioning trade is running its course. Bank of America’s next step is court approval of the Merrill Lynch settlement, and a signed order from Judge Caproni could close out the dispute without the trial that had been set for mid-October.

JPMorgan Chase stock offers a useful read on breadth, since a deeper decline in the name holding up best could signal that the selling is spreading across the large banks. Shareholders can also watch whether the Financial Select Sector SPDR ETF keeps holding up better than Citigroup and Bank of America shares, confirming the pressure is staying concentrated in the money-center names.

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