By Greg Morcroft, MarketWatch
NEW YORK (MarketWatch) — Shares of U.S. financial stocks fell on Tuesday with Bank of America Corp. and Charles Schwab Corp. among the leading decliners.
Bank of America BAC -2.26% said it has begun sending letters to some of its borrowers who may be eligible for some form of principal reductions on their mortgages.
The action follows a recent settlement among five major banks, 49 state attorneys general and the federal government.
Schwab SCHW -2.70% fell after news on Monday that it has recorded a “contingent liability” related to allegations of a scheme involving so-called naked short-selling and violations of registration requirements brought by regulators against its OptionsXpress subsidiary.
In the broader market, the Financial Select Sector SPDR ETF XLF -0.89% which tracks the financial stocks in the S&P 500 index, shed 0.7% in the early going.
As for the three financials in the Dow Jones Industrial Average along with Bank of America, trading was mixed. Shares of J.P. Morgan Chase & Co. JPM -0.54% and American Express Co. [ AXP -0.82% fell as Travelers Cos. TRV -0.02% rose.
Also on the move, shares of Morgan Stanley MS -2.35% shed about 1%.
The company, in a quarterly report filed with the Securities and Exchange Commission, said it may have to put up $7.2 billion in additional collateral or termination payments to counterparties, and may face $2.4 billion collateral requirements at certain exchanges and clearing organizations in the event of a three-notch credit rating downgrade.
The potential collateral needs for Morgan Stanley under that scenario are higher than projections that the securities firm issued late in February.
Overseas, HSBC Holdings PLC HBC -0.53% said Tuesday that its investment-banking division and emerging-market operations helped boost underlying profit in the first quarter, sending its U.S.-listed shares modestly higher.
HSBC’s total operating revenue was $20.44 billion, flat on the same quarter a year before. Net profit attributable to shareholders of the parent company fell to $2.58 billion from $4.15 billion in the same quarter a year earlier. This was partly due to an accounting charge on the value of the bank’s debt.
Greg Morcroft is MarketWatch's financial editor in New York.
