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The Zacks Analyst Blog Highlights: JPMorgan Chase, Bank of America, Citigroup, Wells Fargo and Prosperity Bancshares

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For Immediate Release

Chicago, IL – November 11, 2020 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: JPMorgan Chase & Co. (JPM - Free Report) , Bank of America Corporation (BAC - Free Report) , Citigroup Inc. (C - Free Report) , Wells Fargo & Company (WFC - Free Report) and Prosperity Bancshares, Inc. (PB - Free Report) .

Here are highlights from Tuesday’s Analyst Blog:

Here's Why the Big Banks Are Soaring This Week

The week began with a sense of optimism as the coronavirus vaccine hope added to Joe Biden winning the U.S. Presidential election.

The vaccine being developed by Pfizer and BioNTech SE has been found to be more than 90% effective in preventing coronavirus infections. This is the source of investors’ bullish stance. Thus, all three major indexes – the S&P 500, Dow Jones and Nasdaq – hit all-time highs. While both S&P 500 and Dow Jones ended yesterday in green, the tech-driven Nasdaq fell 1.5%.

The S&P 500 Financials sector was one of the top performers, rallying 8.2%. Further, SPDR S&P Regional Banking ETF and KBW Nasdaq Bank Index jumped 15.4% and 13.5%, respectively.

The Wall Street majors – JPMorgan surged 13.5%, Bank of America 14.2%, Citigroup 11.5% and Wells Fargo were up 10.5%. In fact, all the bank stocks on the S&P 500 Index were up more than 5%. Moreover, several other smaller banks including Prosperity Bancshares, BancorpSouth Bank, Associated Banc-Corp and New York Community Bancorp rallied substantially.

Why Vaccine-Related Development is Propelling Bank Stocks

Bank stocks have been among the worst performing industries since the coronavirus outbreak in March. This is mainly due to the fact that banks’ financials are highly dependent on the health of the economy.

With the pandemic impeding business activities across the globe and resulting in economic slowdown, banks have been hit hard. This, coupled with low interest rates, (the Federal Reserve cut the rates to near-zero in mid-March to support the U.S. economy) has been weighing significantly on the bank stocks.  

Therefore, a positive development related to coronavirus vaccine is being seen as a hope for restoration of normal activities. Also, it indicates that there is a high chance that other vaccine developers could find favorable results soon. If these happen, economic recovery will likely speed up and the chances of banks facing high levels of delinquent loans will lessen. This will also reduce loan-loss uncertainty, which has led banks to build billions of dollars of reserves.

Further, as the economy recovers, demand for loans (which had been faltering of late due to less appetite among businesses to grow) should rise. This will, in turn support banks’ net interest income (its primary source of revenues) and net interest margin despite a low rate environment.

Additionally, several banks had voluntarily/involuntarily suspended share buybacks and even slashed dividends to conserve liquidity. Thus, with the economic recovery, banks’ capital development actions are expected to return to pre-crisis level. This will enhance shareholder value.

Though the vaccine-related development is good news, banks are not expected to be out of woods just yet. Distribution of the vaccine to those who immediately need it and to the larger population will take time.

But one should keep an eye on fundamentally strong bank stocks and make wise investment decisions till then to get profitable returns in the future.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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