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Bank Stock Roundup: Fed's Policy Shift, Restructuring, JPM, WFC, C in Focus
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Performance of major bank stocks over the last five trading days inspired optimism. Things have been looking up for the bond market, with Treasury yields approaching the recent high, following the announcement of a policy shift by the Federal Reserve. In a speech at Jackson Hole, chairman Jerome Powell stated that the central bank will aim for an average annual inflation of 2%.
Following this, the rate on the 10-year Treasury bond rose to 0.744%, marking the highest level since mid-June. Further, the yield on the 30-year Treasury bond climbed to 1.499%.
Nevertheless, mortgage rates continue to be at record low levels. Moreover, Fannie Mae (FNMA - Free Report) and Freddie Mac (FMCC - Free Report) — government-sponsored enterprises that back millions of mortgages in the United States — have announced a delay in the implementation of 0.5% refinancing fees. Now, mortgage lenders will have to pay 0.5% for every refinance loan made to consumers starting Dec 1 instead of September.
Therefore, these are expected to continue supporting origination volumes and refinancing activities. Thus, banks with mortgage banking operations will likely witness a rise in mortgage revenues.
Talking about company-specific developments, major banks continued with business restructuring initiatives. These efforts are anticipated to attract more business and fuel revenue growth. Further, with advancement in technology, increase in digital offerings by major banks was at the peak.
1. With an aim of capitalizing on acceleration of the digital banking boom owing to the coronavirus pandemic, JPMorgan (JPM - Free Report) intends to launch an an online-only bank in the U.K. early next year. This was first reported by Sky News, citing persons familiar with the matter.
2. At a time when major U.S. banks have put the brakes on job cuts amid the coronavirus pandemic, Wells Fargo (WFC - Free Report) is doing otherwise. Per a Bloomberg report, early this month, the bank resumed its retrenchment process under mounting pressure for cost reduction, terminating a number of positions, in view of the plan of rigorous job cuts in the coming period.
3. If JPMorgan goes ahead with the plan of owning 100% stake in its China mutual fund joint venture, China International Fund Management Co., it will have to pay a minimum of 7 billion yuan ($1 billion). Per Bloomberg, the price represents a premium of 51% over the appraised value of the stake.
4. Moving ahead with business expansion moves, Citigroup (C - Free Report) is gearing up to offer Direct Custody & Clearing services in Finland. The latest move will make it the only global bank offering a pan-Nordic service and expanding its proprietary DCC network covering the entire Nordic region.
5. In yet another news related to JPMorgan, its enterprise blockchain platform, Quorum has been acquired by Brooklyn, N.Y.-based Ethereum-focused industry startup ConsenSys. Also, JPMorgan has made an investment in ConsenSys to support its goal of helping developers build next-generation networks and enabling enterprises to launch more powerful financial infrastructure.
Price Performance
Here is how the seven major stocks performed:
Company
Last Week
6 months
JPM
5.2%
-10.1%
BAC
4.3%
-7.4%
WFC
4.0%
-38.3%
C
4.9%
-16.8%
COF
9.1%
-20.5%
USB
4.9%
-18.6%
PNC
5.7%
-9.0%
Over the past five trading days, Capital One (COF - Free Report) and PNC Financial have recorded the maximum gains, with their shares appreciating 9.1% and 5.7%, respectively. Also, shares of JPMorgan have gained 5.2% in the same period.
Over the past six months, shares of Wells Fargo, Capital One and U.S. Bancorp (USB - Free Report) have depreciated 38.3%, 20.5% and 18.6%, respectively.
What’s Next?
Over the next five trading days, unless there is any significant change in the economic situation related to the coronavirus pandemic, the major bank stocks are likely to perform in a similar fashion.
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This outperformance has not just been a recent phenomenon. From 2000 – Q2 2020, while the S&P averaged +5.5% per year, our top strategies averaged up to +51.7% per year.
Image: Bigstock
Bank Stock Roundup: Fed's Policy Shift, Restructuring, JPM, WFC, C in Focus
Performance of major bank stocks over the last five trading days inspired optimism. Things have been looking up for the bond market, with Treasury yields approaching the recent high, following the announcement of a policy shift by the Federal Reserve. In a speech at Jackson Hole, chairman Jerome Powell stated that the central bank will aim for an average annual inflation of 2%.
Following this, the rate on the 10-year Treasury bond rose to 0.744%, marking the highest level since mid-June. Further, the yield on the 30-year Treasury bond climbed to 1.499%.
Nevertheless, mortgage rates continue to be at record low levels. Moreover, Fannie Mae (FNMA - Free Report) and Freddie Mac (FMCC - Free Report) — government-sponsored enterprises that back millions of mortgages in the United States — have announced a delay in the implementation of 0.5% refinancing fees. Now, mortgage lenders will have to pay 0.5% for every refinance loan made to consumers starting Dec 1 instead of September.
Therefore, these are expected to continue supporting origination volumes and refinancing activities. Thus, banks with mortgage banking operations will likely witness a rise in mortgage revenues.
Talking about company-specific developments, major banks continued with business restructuring initiatives. These efforts are anticipated to attract more business and fuel revenue growth. Further, with advancement in technology, increase in digital offerings by major banks was at the peak.
(Read: Bank Stock Roundup for the Week Ending Jul 24, 2020)
Important Developments of the Week
1. With an aim of capitalizing on acceleration of the digital banking boom owing to the coronavirus pandemic, JPMorgan (JPM - Free Report) intends to launch an an online-only bank in the U.K. early next year. This was first reported by Sky News, citing persons familiar with the matter.
2. At a time when major U.S. banks have put the brakes on job cuts amid the coronavirus pandemic, Wells Fargo (WFC - Free Report) is doing otherwise. Per a Bloomberg report, early this month, the bank resumed its retrenchment process under mounting pressure for cost reduction, terminating a number of positions, in view of the plan of rigorous job cuts in the coming period.
3. If JPMorgan goes ahead with the plan of owning 100% stake in its China mutual fund joint venture, China International Fund Management Co., it will have to pay a minimum of 7 billion yuan ($1 billion). Per Bloomberg, the price represents a premium of 51% over the appraised value of the stake.
4. Moving ahead with business expansion moves, Citigroup (C - Free Report) is gearing up to offer Direct Custody & Clearing services in Finland. The latest move will make it the only global bank offering a pan-Nordic service and expanding its proprietary DCC network covering the entire Nordic region.
5. In yet another news related to JPMorgan, its enterprise blockchain platform, Quorum has been acquired by Brooklyn, N.Y.-based Ethereum-focused industry startup ConsenSys. Also, JPMorgan has made an investment in ConsenSys to support its goal of helping developers build next-generation networks and enabling enterprises to launch more powerful financial infrastructure.
Price Performance
Here is how the seven major stocks performed:
Company
Last Week
6 months
JPM
5.2%
-10.1%
BAC
4.3%
-7.4%
WFC
4.0%
-38.3%
C
4.9%
-16.8%
COF
9.1%
-20.5%
USB
4.9%
-18.6%
PNC
5.7%
-9.0%
Over the past five trading days, Capital One (COF - Free Report) and PNC Financial have recorded the maximum gains, with their shares appreciating 9.1% and 5.7%, respectively. Also, shares of JPMorgan have gained 5.2% in the same period.
Over the past six months, shares of Wells Fargo, Capital One and U.S. Bancorp (USB - Free Report) have depreciated 38.3%, 20.5% and 18.6%, respectively.
What’s Next?
Over the next five trading days, unless there is any significant change in the economic situation related to the coronavirus pandemic, the major bank stocks are likely to perform in a similar fashion.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through Q2 2020, while the S&P 500 gained an impressive +44.0%, five of our strategies returned +50.9%, +93.8%, +122.2%, +153.0%, and even +156.8%.
This outperformance has not just been a recent phenomenon. From 2000 – Q2 2020, while the S&P averaged +5.5% per year, our top strategies averaged up to +51.7% per year.
See their latest picks free >>