Here are some of the morning’s top stories from the financial sector (NYSE:XLF):
1) JP Morgan (NYSE:JPM) reached a settlement with the SEC yesterday totaling $154 million over a mortgage-tied deal that went sour and cost a pool of investors significant losses. The legal trouble for Morgan is not expected to be stopped in its tracks though, as Reuters reveals that yesterday’s settlement, “could be just a small taste of the losses it faces from mortgage-linked securities.” Chris Whalen, co-founder of Institutional Risk Analytics, thinks the bank could face up to $30 billion in total losses from its activities in the financial crisis once all is said and done. Perhaps even more irreparable than the financial damage JP faces, the firm may have permanently blemished its reputation as one of the “good guys” on Wall Street. Reportedly, the bank duped customers by selling them packages of “weak-asset” financial products that hedge funds were shorting (JPM had spoken with the hedge funds). Expect these types of legal troubles to continue plaguing other banks such as Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC), and Citibank (NYSE:C).
2) HSBC (NYSE:HBC) is not taking it easy on fellow banks this morning, as its analysts downgraded 3 U.K. based financials, Lloyd’s (NYSE:LYG), Barclays (NYSE:BCS), and Royal Bank of Scotland (NYSE:RBS), due to changes in UK credit policies that could cost the institutions as much as $10 billion. Other European banks continue to slump this morning on a wavering outlook in Greece and just a poor day for the sector.
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