Shares of U.S. banks are taking a beating in December, as worries over an expected recession and weakening profit margins dull the industry's appeal.
"Bank stocks do not do well in a recession, and more and more investors are worried about a hard landing," said Matt Maley, chief market strategist at Miller Tabak.
Profit margins are one potential trouble spot investors are focusing on. Higher rates led net interest margins -- which measure how much a bank earns on loans and fixed income securities compared with what it pays out on deposits -- in the third quarter to expand to their widest average spread in three years, among 20 banks tracked by RBC Capital Markets.
The extent of such pressure will become clearer next month when banks report fourth-quarter earnings. In another potential stumbling block for the group, some of the banks that lent Elon Musk $13 billion to buy Twitter areInvestors will learn more about the economy's health next week, with data due on housing and consumer confidence.
The S&P 500 banks index trades at about nine times forward earnings estimates, below its long-term average P/E of 12 times and well lower than the roughly 17 times for the overall S&P 500, according to Refinitiv Datastream.
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