BOK Financial in Tulsa, Okla., has recorded $50 million of pretax losses to reduce the carrying value of certain trading securities.
The $50.2 billion-asset company said in a regulatory filing Wednesday that the losses have been recorded since March 4. Most of the recorded losses are unrealized; they could fluctuate over the rest of the first quarter.
BOK Financial pointed to recent events, including expected action by the Federal Reserve to combat rising inflation and market disruptions caused by Russia’s invasion of Ukraine, for reduced investor demand for lower-coupon, U.S. government agency issued mortgage-backed securities.
“Providing liquidity to mortgage markets has been a successful and profitable part of our business for many years,” Stacy Kymes, BOK Financial’s president and CEO, said in the filing.
“We believe this charge materially represents fair value adjustment at present, however market conditions are choppy and this could change as market conditions evolve,” Kymes added. “While this business has created earnings volatility currently, the historic and long-term prospects of our trading platform has been good and we remain committed to this business.”
The loss is roughly equal to 56 cents a share, or about 1% of tangible book value per share, Keefe, Buyette & Woods observed in a note to clients.
Other banks could have similar losses, analysts warned.
“At this time, we are not adjusting our estimates given the rapidly evolving situation and continued volatility of the market in both directions,” Jon Arfstrom, an analyst at RBC Capital Markets, wrote in a client note. “We will continue to monitor current events closely given the potential long-term consequences for both BOK and the industry at large.”