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Bank Stock Roundup: JPM, WFC & C in Focus on Business Restructuring Initiatives

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Over the past five trading sessions, the performance of major bank stocks has depicted a bearish stance as the rate on the 10-year Treasury bond have fallen from its highs in the prior week. Rising coronavirus cases in Europe and renewed lockdown announcement in several places hurt investor sentiments.

Despite the fall in yields, the rate on the 10-year Treasury bond stands at 1.63%, while that for the 30-year Treasury bond is 2.35%. Thus, the steepening yield curve is expected to benefit major banks’ net interest margins amid a low interest rate environment.

With banks’ financials directly tied to the health of the economy, investors are now expecting improved profitability for major banks in the quarters ahead.

Additionally, the Federal Reserve has announced that “additional restrictions on bank holding company dividends and share repurchases” will be lifted after Jun 30 following the completion of this year’s stress test.

Now talking about bank-specific developments, major banks continued with the business restructuring initiatives over the past five trading sessions. These efforts are expected to further support banks’ profitability over time.

(Read: Bank Stock Roundup for the Week Ending Feb 26, 2021)

Important Developments of the Week

1. JPMorgan’s (JPM - Free Report) asset-management unit – J.P. Morgan Asset Management – plans to buy a 10% stake in China Merchants Bank Co.’s wealth management subsidiary. While the deal is yet to receive regulatory approval, the company is expected to pay nearly $410 million for obtaining the minority stake.

2. Wells Fargo (WFC - Free Report) has inked a deal to divest its Corporate Trust Services business to Australia-based Computershare Limited for $750 million. This is in line with the company’s strategy of concentrating on businesses core to its consumer and corporate client base. The transaction, likely to close in the first half of 2021, is subject to customary closing conditions.

3. Citigroup (C - Free Report) has entered into partnership with Sharegain, a capital markets fintech firm, to introduce its first fully automated securities lending solution for clients availing custodial services. The new solution has been developed in a manner that makes its integration with wealth managers’ existing IT infrastructure possible. Also, clients will be able to witness a fully digital experience, from enrolment in the program through managing their lending, with this solution.

 

Price Performance

Here is how the seven major stocks performed:

Company

Last Week

6 months

JPM

-1.7%

65.9%

BAC

-2.3%

62.1%

WFC

-0.8%

67.5%

C

-1.8%

74.3%

COF

1.1%

85.2%

USB

-0.6%

59.4%

PNC

0.7%

71.7%

Over the past five trading days, Bank of America (BAC - Free Report) and Citigroup have recorded the maximum loses, with their shares falling 2.3% and 1.8%, respectively. However, shares of Capital One (COF - Free Report) have rallied 1.1% during the same period.

Over the past six months, shares of Capital One have jumped 85.2%, while Citigroup and PNC Financial (PNC - Free Report) have surged 74.3% and 71.7%, respectively.

What’s Next?

Over the next five trading days, unless there is any major change in the economic situation, the major bank stocks are likely to perform in a similar fashion.

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