The collapse in oil prices set a chain reaction to the downside for stocks.
Financial services companies have exposure to debt from oil firms in the 5-10% range. The combination of debt default worries and a slowing economy sent financial services stocks lower. So, after the dramatic drop is the highly attractive dividend yield enough to offset the risks of further declines?
Investors cannot time when the fear gripping the markets will end. One may only pick a discounted entry price that prices in the slowdown ahead. Wells Fargo (NYSE:WFC) recently settled with regulators related to the fraudulent sales practice. At the 8 times P/E range, the stock is a good long-term consideration. Bank of Montreal (TSX:BMO), TD Bank (TSX:TD), Royal Bank (TSX:RY), and Scotiabank (TSX:BNS) are all Canadian banks that will suffer short-term losses from the oil price collapse.
Yet these banks all survived the 2016 correction in the energy market. This time is no different. The banks have strong deposit growth and may find ways to improve their efficiencies.
Both Citigroup (NYSE:C) and Bank of America (NYSE:BAC) posted unchanged credit-card delinquencies for January 2020.
