What Happened?
A number of stocks fell in the morning session after a surprisingly weak July jobs report and the announcement of sweeping new tariffs fueled fears of an economic slowdown and an impending interest rate cut.
The U.S. economy added just 73,000 jobs in July, the weakest gain in over two years, while the unemployment rate rose to 4.2%. This dismal data significantly increased market expectations for a Federal Reserve interest rate cut, with traders now pricing in an 80% probability of a cut in September. Lower interest rates typically harm bank profitability by compressing their net interest margins—the difference between what they earn on loans and pay on deposits. Compounding these worries, the announcement of new tariffs on imports from 92 countries has sparked fears of a global trade war, which could further dampen economic growth and disrupt supply chains, creating a challenging environment for the banking industry.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Regional Banks company Citizens Financial Group (NYSE: CFG) fell 3.4%. Is now the time to buy Citizens Financial Group? Access our full analysis report here, it’s free.
- Regional Banks company Banc of California (NYSE: BANC) fell 3.4%. Is now the time to buy Banc of California? Access our full analysis report here, it’s free.
- Regional Banks company Atlantic Union Bankshares (NYSE: AUB) fell 3.4%. Is now the time to buy Atlantic Union Bankshares? Access our full analysis report here, it’s free.
- Thrifts & Mortgage Finance company Flagstar Financial (NYSE: FLG) fell 3.1%. Is now the time to buy Flagstar Financial? Access our full analysis report here, it’s free.
- Diversified Banks company Bank of America (NYSE: BAC) fell 3.2%. Is now the time to buy Bank of America? Access our full analysis report here, it’s free.
Zooming In On Banc of California (BANC)
Banc of California’s shares are not very volatile and have only had 9 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The previous big move we wrote about was 8 days ago when the stock dropped 4.7% on the news that the company reported its second-quarter 2025 financial results, which showed flat reported earnings per share due to a significant loss from strategic loan sales. While the bank highlighted a 158% year-over-year surge in adjusted earnings per share to $0.31, its reported earnings per share of $0.12 remained unchanged from the prior year. This figure missed the analyst consensus estimate of $0.27 per share. The discrepancy was largely attributed to a pre-tax loss of $26.3 million resulting from the strategic sale of loans. Despite a slight improvement in the bank's net interest margin, investors appeared to focus on the flat reported earnings and the loss from the asset sale, which contributed to the stock's negative performance.
Banc of California is down 7% since the beginning of the year, and at $14.19 per share, it is trading 20.2% below its 52-week high of $17.77 from November 2024. Investors who bought $1,000 worth of Banc of California’s shares at the IPO in November 2023 would now be looking at an investment worth $1,141.
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