JPMorgan: Sell-off in large banking shares 'overdone'

By Scott Kanowsky 

Investing.com -- A recent sell-off in large banking shares was "overdone," according to analysts at JPMorgan, mostly due to the stronger cash positions these lenders have compared to their smaller peers.

Banking stocks lost over $80 billion in value on Thursday after startups-focused SVB Financial Group (NASDAQ:SIVB) announced that it had embarked on a $1.75B share sale in a bid to shore up its finances. In addition, the struggling firm said it entered into a subscription agreement with equity investor General Atlantic to purchase $500 million in a separate private transaction.

On Friday, SVB shares were down 44% in pre-market trading, adding on to a 60% drop in the prior session. Meanwhile, bigger U.S. rivals JPMorgan (NYSE:JPM), Citigroup (NYSE:C) and Morgan Stanley (NYSE:MS) were also slightly in the red, easing back from steeper drops on Thursday.

But in a note to clients, the JPMorgan analysts argued that "managements of many banks" under its coverage were calm and did not indicate any concern in meetings during yesterday's slide in these stocks.

"We believe the sell-off was overdone as large banks have a lot more liquidity than smaller banks, they are more diversified with broader business models, have a lot of capital, are much better managed in regards to risk, and have a lot of oversight from regulators," the analysts said.

As a result, they added that they don't expect to see a "fire sale" of securities from these bigger lenders.