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Banking Wrap Up: The Financial Sector Falls on European Uncertainty


Citi and BofA are among the biggest losers today, except for French banks that are terrified of a popular Socialist President.

The new troubles in the eurozone spell bad news for Citigroup (C) and Bank of America (BAC). The two mega banks were the hardest hit in today's trading after Wall Street woke up to find that more French voters were choosing the Socialist Francois Hollande over Nicolas Sarkozy and, even the Netherlands, one of the strongest economies in Europe that publicly scolded Greece on fiscal responsibility, can't pass a budget. Both declined more than 3% in the morning and at 2:15 p.m. New York time Citigroup was down 2.60% and BofA was down 2.15%.

Geert Wilders, the anti-immigrant firebrand and leader of the Dutch Freedom Party, walked out of budget negotiations with the main ruling party that needs the Freedom Party support to rule. The Netherlands might lose its AAA rating after elections are held despite the fact that the country is the second-safest lender in Europe after Germany. Eurozone's PMI Composite Output Index also fell today, showing a contraction in both services and manufacturing.

French banks took a major hit today over political uncertainty as French voters chose Hollande over Sarkozy. Credit Agricole (CRARY), BNP Paribas (BNPQY), and Societe Generale (SCGLY) all fell more than 3.3% in today's trading. Hollande favors a tax on all financial transactions, banning stock options, taxing bank earnings, and Glass-Steagall-style separation of banking and "speculative" activities.

Wells Fargo (WFC), which has far less international exposure than other banks, fell just 1.24% today. The broad financial sector, measured by the Financial Select Sector SPDR ETF (XLF) dropped 0.86%.

SunTrust Banks (STI) shares rose 3.41% today after reporting that profit jumped 38.8% on fewer delinquencies and improved lending. The Atlanta-based bank earned $0.46 per share in the first quarter of this year, beating the analysts' consensus of $0.33. SunTrust has been "de-risking" its balance sheet, bringing its higher risk loans down from $23.4 billion to $9.7 billion since the fourth quarter of 2008. Over the course of the last year, the bank high-risk loans declined by 20%.

Twitter: @vincent_trivett
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