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Which U.S. Banks Could Brexit Hurt Most?

The "too big to fail" money center banks Bank of America (BAC) , Citigroup (C) , JPMorgan Chase (JPM) and Wells Fargo (WFC) will soon report earnings for the second quarter. It may be too soon for these banking giants to show any adverse effects of the United Kingdom's referendum to leave the European Union. However, guidance may reflect potential exposure to Brexit.

Both Wells Fargo and Citigroup are holdings in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio.

According to SNL Financial, U.S. banks including Citigroup, JPMorgan and Bank of America are exposed to Brexit risk as shown in regulatory filings of financial data at the end of 2015. Banks must report exposures that exceed certain thresholds for deposit balances, securities, federal funds sold, and loans. The counter-party risk that is monitored includes banks, government agencies, insurance companies, investment banks and pension funds. S&P Global Market Intelligence analyzed this data to assess the exposure following the Brexit vote.

Given these uncertainties, the "too big to fail" banks are either in correction or bear market territory. These four banking giants are in the KBW banking index, which is in bear market territory as well -- 22.9% below its mutiyear high, set in July 2015.

Another concern is the unexplained surge of $13.5 trillion in the notional amount of derivatives in the first quarter of 2016 to $195.5 trillion. This exposure is shown on the FDIC quarterly banking profile for the first quarter. Global derivative exposures total $500 trillion.

As for earnings expectations, JPMorgan reports first on July 14. Analysts expect the nation's biggest bank to earn $1.43 per share.

Citigroup and Wells Fargo report on July 15. Analysts expect these two to earn $1.15 and $1.03 per share, respectively.

Bank of America reports on July 18. Analysts expect the bank to earn 37 cents a share.

Here's a scorecard for the four "too big to fail" banks.


Here's the daily chart for Bank of America.

Courtesy of MetaStock Xenith

Bank of America had a close of $12.74 on Tuesday down 24.3% year to date and in bear market territory, 31.1% below its multiyear high of $18.48, set on July 22, 2015. The stock is up 15.9% from its 2016 low of $10.99, set on Feb. 11.

The daily chart shows the Fibonacci Retracements from the July 22 high to the Feb.11 low. The rebound to its 2016 high of $15.30 on April 27 was below its 200-day simple moving average, then at $15.57, and below its 61.8% retracement of $15.62. From this high the stock declined to and held its 38.2% retracement of $13.86 on May 6. The stock then rebounded to $15.15 into May 25, but again failed below its 200-day simple moving average, then at...


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