The Biggest Losers of the Year: Financials

With the year coming to a close, there is little to show for in the S&P 500 (NYSEARCA:SPY).  The index has moved between a 52-week low of 1,074 and a 52-week high of 1,370, but is virtually back to where it began the year.

The financial sector (NYSEARCA:XLF) was the worst performing sector of the S&P 500.  Large banks across the board had dismal returns.  Financial giants such as Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS) and Citigroup (NYSE:C) plummeted 46 percent, 44 percent and 43 percent, respectively.  Even Warren Buffett favorite, Wells Fargo (NYSE:WFC) fell nearly 11 percent.

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One of the biggest financial losers this year was Bank of America (NYSE:BAC).  The bank received a $5 billion capital injection from Buffett in August, but the move did little to restore confidence.  Bank of America shares fell nearly 60 percent this year, making it the biggest Dow (NYSEARCA:DIA) loser.  The bank was not only a miss with investors, but also customers.  Earlier in the year, the bank announced a plan to charge customers a $5 fee to use their debit cards for purchases.  The fee was met with a strong wave of customer backlash.  After JP Morgan Chase (NYSE:JPM), the nation’s largest bank, announced they would not be backing such fees, Bank of America decided to scrap the plan.

The pain may not be over for Bank of America.  The bank has raised about $50 billion from asset sales since January 2010, but may still need to raise more capital.  Marty Mosby, an analyst with Guggenheim Partners estimates Bank of America may need to raise another $45 billion by 2019.  The bank also has a time bomb sitting on its books.  In October, Bank of America moved up to $53 trillion in derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits.  Translation, when the derivatives timer goes off, this is one bank that is going to leave a mess for taxpayers, again.

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Looking ahead to 2012, it will be difficult for investors to turn bullish on financials.  Despite all the summits, press releases and liquidity measures, the euro zone is still sitting on the brink of disaster.  As the euro zone continues to deteriorate, it will place even more pressure on the globalized financial system.  This year also reminded investors that some financial institutions will not weather the insolvency storm, as MF Global filed for bankruptcy on Halloween, the eight largest bankruptcy in U.S. history.  “Based on a crushing bear market in bank stocks, investors are understandably jaded and very skeptical as it relates to the relative performance of bank stocks,” said John Pandtle, portfolio manager at Eagle Asset Management. “It reflects a very significant risk premium or discount rate based on the macro uncertainty and all the concern that you see related to Europe.”

Here’s how financial giants are trading in the final day of market action in 2011:

The Goldman Sachs Group, Inc. (NYSE:GS): GS shares recently traded at $90.44, down $0.57, or 0.63%. They have traded in a 52-week range of $84.27 to $175.34. Volume today was 1,855,496 shares versus a 3-month average volume of 7,776,060 shares. The company’s trailing P/E is 13.76, while trailing earnings are $6.57 per share.

Morgan Stanley (NYSE:MS): MS shares recently traded at $15.07, down $0.17, or 1.12%. They have traded in a 52-week range of $11.58 to $31.04. Volume today was 7,257,659 shares versus a 3-month average volume of 36,224,400 shares. The company’s trailing P/E is 9.88, while trailing earnings are $1.53 per share.

Bank of America Corporation (NYSE:BAC): BAC shares recently traded at $5.45, down $0.01, or 0.18%. They have traded in a 52-week range of $4.92 to $15.31. Volume today was 64,719,659 shares versus a 3-month average volume of 263,139,000 shares. The company’s trailing earnings are $-0.31 per share.

Citigroup, Inc. (NYSE:C): C shares recently traded at $26.40, down $0.36, or 1.35%. They have traded in a 52-week range of $21.40 to $51.50. Volume today was 11,755,824 shares versus a 3-month average volume of 58,354,200 shares. The company’s trailing P/E is 7.04, while trailing earnings are $3.75 per share.

Wells Fargo & Company (NYSE:WFC): WFC shares recently traded at $27.63, down $0.13, or 0.47%. They have traded in a 52-week range of $22.58 to $34.25. Volume today was 5,175,645 shares versus a 3-month average volume of 37,019,300 shares. The company’s trailing P/E is 10.23, while trailing earnings are $2.70 per share.

To contact the reporter on this story: Eric McWhinnie at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com