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Bank Stock Roundup: No Rate Hike Decision, Brexit Concerns, Streamlining Put Citi, BofA in Focus
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Over the last five trading days, all eyes were on the Federal Reserve’s two-day policy meeting. Nonetheless, as expected by the market, the Fed decided to keep the interest rates unchanged.
The Fed chairwoman Janet Yellen said, “I'm not comfortable to say it's in the next meeting or two, but it could be… It's not impossible that by July, for example, we would see data that led us to believe that we are in a perfectly fine course.”
Additionally, the Fed now expects a slowdown in the pace of rate hikes over the next two years given the current economic projections. Though the markets had already factored in the Fed’s decision, the uncertainty about the next hike led to decline in banking stocks.
Separately, concerns about ‘Brexit’ continued to unnerve investors as banks’ operations are likely to be hit. Apart from this, decline in crude prices also weighed on the investors’ sentiments.
Now coming to bank specific news that dominated the last five trading sessions, streamlining activities were in focus. Banks, in order to grow revenues, are trying other avenues to support bottom line. Moreover, resolution of legal matters was in the headlines.
1. Per a Reuters report, Citigroup Inc. (C - Free Report) will take another three months to finalize the sale of its Brazilian retail banking unit. Notably, Helio Magalhaes, the senior country executive for Citigroup in Brazil, did not disclose the names of the potential bidders and said the bank is working on the sale of the unit. (Read more: Citigroup Brazil Unit Divestment May Take Up to 3 Months)
2. Per a Houston Business Journal report, JPMorgan Chase & Co. (JPM - Free Report) is planning to transfer certain Houston jobs with an aim to streamline its operations related to auto loans. The company has communicated its intent to the Texas Workforce Commission.
The move comes on the heels of the company’s plan to shut its Chase Auto Finance operations in Houston. The closure will impact around 90 local jobs, while the company will move some other jobs related to auto loans to Houston. (Read more: JPMorgan to Slash Certain Houston Jobs & Relocate Others)
3. Bank of America Corp. (BAC - Free Report) , which is keen to integrate new digital technologies into its system, is reducing its brick-and-mortar branches as well as headcount to use more of digital media. In this context, more than 8,000 employees are set to be eliminated in BofA’s consumer banking business in the wake of shifting inclination of the customers toward digital banking, which has lowered the requirement for back-office staff and bank tellers. (Read more: Digital Banking Revolution to Cause More Layoffs at BofA?)
4. Citigroup sued the telecom major AT&T, Inc. (T - Free Report) for trademark infringement. The bank alleged that AT&T’s use of the trademarks ‘thanks’ and ‘AT&T thanks’ infringes upon the former’s trademarks including ‘ThankYou’ and ‘Citi ThankYou’. (Read more: Citigroup Sues AT&T for Infringing 'ThankYou' Trademark)
5. British financier Guy Hands had withdrawn his seven-year long litigation against Citigroup. The lawsuit was related to Terra Firma Capital Partners’, the private equity firm owned by Guy Hands, purchaser of EMI Group Ltd. in 2007. Both the parties confirmed the dismissal of the case. Justice Michael Burton said at a special hearing: “I’m sure this is the right result.” (Read more: Citigroup & Guy Hands End Legal Tussle in London)
6. Issues pertaining to foreign exchange (“FX”) trades still seem to hang over The Bank of New York Mellon Corp. (BK - Free Report) with the company agreeing to shell out $30 million in fines to the Securities and Exchange Commission (“SEC”). The penalty is to settle the civil charges over the bank’s alleged mispricing of FX transactions. (Read more: BNY Mellon Settles FX-Pricing Case with SEC for $30M)
Price Performance
Overall, the performance of banking stocks remained bearish. Here is how the seven major stocks performed.
Company
Last Week
6 months
JPM
-2.5%
-6.6%
BAC
-3.8%
-24.5%
WFC
-3.1%
-14.8%
C
-4.1%
-21.7%
COF
-8.3%
-14.8%
USB
-2.1%
-6.3%
PNC
-3.6%
-12.5%
In the last five trading sessions, Capital One Financial Corp. (COF - Free Report) and Citigroup were the major losers, with their shares plunging 8.3% and 4.1%, respectively. Also, BofA shares fell 3.8%.
On the other hand, BofA and Citigroup were the worst performers over the last six months with their shares tumbling 24.5% and 21.7%, respectively. Moreover, shares of both Wells Fargo & Co. (WFC - Free Report) and Capital One declined 14.8%.
What's Next in the Banking Space?
Over the next five trading days, banking stocks are likely to continue performing in the similar manner. However, with the Fed releasing the 2016 stress test results on Jun 23, the performance the performance might change to some extent.
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Bank Stock Roundup: No Rate Hike Decision, Brexit Concerns, Streamlining Put Citi, BofA in Focus
Over the last five trading days, all eyes were on the Federal Reserve’s two-day policy meeting. Nonetheless, as expected by the market, the Fed decided to keep the interest rates unchanged.
The Fed chairwoman Janet Yellen said, “I'm not comfortable to say it's in the next meeting or two, but it could be… It's not impossible that by July, for example, we would see data that led us to believe that we are in a perfectly fine course.”
Additionally, the Fed now expects a slowdown in the pace of rate hikes over the next two years given the current economic projections. Though the markets had already factored in the Fed’s decision, the uncertainty about the next hike led to decline in banking stocks.
Separately, concerns about ‘Brexit’ continued to unnerve investors as banks’ operations are likely to be hit. Apart from this, decline in crude prices also weighed on the investors’ sentiments.
Now coming to bank specific news that dominated the last five trading sessions, streamlining activities were in focus. Banks, in order to grow revenues, are trying other avenues to support bottom line. Moreover, resolution of legal matters was in the headlines.
BANKS-MAJOR REGIONAL Industry Price Index
BANKS-MAJOR REGIONAL Industry Price Index
(Read: Bank Stock Roundup for the week ending Jun 3, 2016)
Important Developments of the Week
1. Per a Reuters report, Citigroup Inc. (C - Free Report) will take another three months to finalize the sale of its Brazilian retail banking unit. Notably, Helio Magalhaes, the senior country executive for Citigroup in Brazil, did not disclose the names of the potential bidders and said the bank is working on the sale of the unit. (Read more: Citigroup Brazil Unit Divestment May Take Up to 3 Months)
2. Per a Houston Business Journal report, JPMorgan Chase & Co. (JPM - Free Report) is planning to transfer certain Houston jobs with an aim to streamline its operations related to auto loans. The company has communicated its intent to the Texas Workforce Commission.
The move comes on the heels of the company’s plan to shut its Chase Auto Finance operations in Houston. The closure will impact around 90 local jobs, while the company will move some other jobs related to auto loans to Houston. (Read more: JPMorgan to Slash Certain Houston Jobs & Relocate Others)
3. Bank of America Corp. (BAC - Free Report) , which is keen to integrate new digital technologies into its system, is reducing its brick-and-mortar branches as well as headcount to use more of digital media. In this context, more than 8,000 employees are set to be eliminated in BofA’s consumer banking business in the wake of shifting inclination of the customers toward digital banking, which has lowered the requirement for back-office staff and bank tellers. (Read more: Digital Banking Revolution to Cause More Layoffs at BofA?)
4. Citigroup sued the telecom major AT&T, Inc. (T - Free Report) for trademark infringement. The bank alleged that AT&T’s use of the trademarks ‘thanks’ and ‘AT&T thanks’ infringes upon the former’s trademarks including ‘ThankYou’ and ‘Citi ThankYou’. (Read more: Citigroup Sues AT&T for Infringing 'ThankYou' Trademark)
5. British financier Guy Hands had withdrawn his seven-year long litigation against Citigroup. The lawsuit was related to Terra Firma Capital Partners’, the private equity firm owned by Guy Hands, purchaser of EMI Group Ltd. in 2007. Both the parties confirmed the dismissal of the case. Justice Michael Burton said at a special hearing: “I’m sure this is the right result.” (Read more: Citigroup & Guy Hands End Legal Tussle in London)
6. Issues pertaining to foreign exchange (“FX”) trades still seem to hang over The Bank of New York Mellon Corp. (BK - Free Report) with the company agreeing to shell out $30 million in fines to the Securities and Exchange Commission (“SEC”). The penalty is to settle the civil charges over the bank’s alleged mispricing of FX transactions. (Read more: BNY Mellon Settles FX-Pricing Case with SEC for $30M)
Price Performance
Overall, the performance of banking stocks remained bearish. Here is how the seven major stocks performed.
Company
Last Week
6 months
JPM
-2.5%
-6.6%
BAC
-3.8%
-24.5%
WFC
-3.1%
-14.8%
C
-4.1%
-21.7%
COF
-8.3%
-14.8%
USB
-2.1%
-6.3%
PNC
-3.6%
-12.5%
In the last five trading sessions, Capital One Financial Corp. (COF - Free Report) and Citigroup were the major losers, with their shares plunging 8.3% and 4.1%, respectively. Also, BofA shares fell 3.8%.
On the other hand, BofA and Citigroup were the worst performers over the last six months with their shares tumbling 24.5% and 21.7%, respectively. Moreover, shares of both Wells Fargo & Co. (WFC - Free Report) and Capital One declined 14.8%.
What's Next in the Banking Space?
Over the next five trading days, banking stocks are likely to continue performing in the similar manner. However, with the Fed releasing the 2016 stress test results on Jun 23, the performance the performance might change to some extent.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>