Concerns that the ongoing investigation by attorneys general of all 50 states could implicate the banking giants in faulty foreclosures resulted in a significant shave-off in their market value, estimated at around $49.3 billion.
The multi-billion dollar dip affected the market value of Citigroup Inc., Bank of America Corp., Wells Fargo & Co., and JPMorgan Chase & Co.
JPMorgan has already allocated $2.3 billion of reserves to cover mortgage repurchases or litigation expenses amid concerns that other banks will have to spend billions of dollars to purchase loans from mortgage-bond investors as they challenge the paperwork.
JPMorgan Chief Executive Officer Jamie Dimon told the investors during a conference call Oct. 13 that the bank will pay an “incremental” sum to evaluate and fix foreclosure documents.
Analysts are not buying that argument with some saying that the banks will have to suffer hundreds of billions of dollars in losses as they will have no other option but to repurchase from mortgage-bond insurers and investors.
They have named Bank of America, JPMorgan and Wells Fargo as the most vulnerable in the current crisis given their large footprint in the housing market. BofA has already halted foreclosures in all 50 states of the U.S. and will report its third- quarter results tomorrow. San Francisco-based Wells Fargo will announce results Oct. 20 and the New York-based Citigroup is scheduled to post its third quarter results today.
JPMorgan has seen the worst drop in stocks sine Jan. 22 as it lost $3.25, or 8 percent, over the three days ending Oct. 15.
