Capital One Financial Corp. and SunTrust Banks Inc. led bank stocks lower after the companies set aside more money for souring loans.
Lenders are warning that credit trends are beginning to deteriorate after years of historically low defaults. Loan-loss provisions at SunTrust climbed 42 percent to $146 million in the second quarter, driven by charge-offs in its energy portfolio, the Atlanta-based lender said Friday in a statement. Capital One’s provisions increased 4.3 percent to $1.6 billion in the three months ended June 30, the McLean, Virginia-based firm said Thursday in a statement.
“Investors have been highly sensitive to provisioning upside recently, so we’d expect pressure on shares in trading today,” Jason Arnold, an analyst at RBC Capital Markets, said in a note to clients about Capital One. “The provision for losses was much larger than expected."
Capital One declined 3 percent to $65.99 at 9:57 a.m. in New York, the worst performance in the KBW Bank Index. SunTrust, the index’s third-worst stock, dropped 2.6 percent to $42.03. The 24-company index declined less than 1 percent.