In the last four trading days, bank stocks put up a lackluster show. Mortgage rates declined in the week, hitting 4.52%, along with bond yields, on escalating trade issues between United States and its major trade allies. This weighed on investor sentiments. However, homeowners seeking lower rates for refinancing are turning out to be big-time gainers.
Further, the benchmark 10-year Treasury yield shrunk this week as demand for safe-haven assets increased.
Nevertheless, coming to company-specific news, litigations and probes dominated headlines. The law enforcement agencies are also on track to resolve such issues, avoiding lengthy litigations. Moreover, restructuring activities of banks continued with the target of improving operational efficiency.
Additionally, banks rewarded shareholders with dividend hikes following 2018 capital plan approval.
(Read: Bank Stock Roundup for the Week Ending Jun 29, 2018)
Important Developments of the Week
1. Banks continue to make amends for past misconducts. Recently, as part of a settlement reached with regulators, Citigroup (C - Free Report) agreed to refund $335 million to its credit card customers holding 1.75 million customer accounts, after having confessed to charging higher interest rates to some of the defaulters since 2011. Notably, the banking giant was not charged additional fine by the Consumer Financial Protection Bureau (CFPB) as it identified the issue and reported to CFPB in 2017. Per Citigroup, the refunds averaged around $190 and the refund process will likely be completed by the end of this year. (Read more: Citi Agrees With $335M Settlement for Refunds To Customers)
2. A lawsuit has been filed against Wells Fargo (WFC - Free Report) that alleges it of encouraging retailers to include hidden fees in the selling price using the bank’s financing programs. The case has been filed by El Paso, TX-based J Edwards Jewelry Distributing and its president, John Silverman, on behalf of more than 5,000 retailers in the United States District Court for the Northern District of California. Per the complaint, Wells Fargo made retailers advertise that customers could purchase their products with the benefit of interest-free finance programs, whereas, in fact, the prices were already inflated with a double-digit interest charge.
Wells Fargo has been accused of violating the U.S. Truth in Lending Act, under which, lenders are supposed to disclose financing charges in detail. (Read more: Wells Fargo Faces Lawsuit for Violating Truth in Lending Act)
3. With an aim to further expand its insurance business, BB&T Corporation (BBT - Free Report) through its wholly owned subsidiary, BB&T Insurance Holdings, Inc. acquired Regions Insurance Group. The financial terms of the transaction, announced in April, were not disclosed. Regions Insurance is a subsidiary of Regions Financial Corporation (RF - Free Report) . The transaction further strengthens BB&T’s wholesale and retail insurance channels. The deal positions the company as the fifth largest insurance broker in the United States and globally. (Read more: BB&T Unit Closes Regions Insurance Group Deal: More to Come?)
4. JPMorgan (JPM - Free Report) initiated relocation plans for several dozens of employees working in its U.K. office as a measure to ensure business continuity after Britain’s exit from the EU. A memo was issued by Daniel Pinto, chief executive of JPMorgan’s Corporate & Investment Bank and Mary Erdoes, chief executive of its Asset & Wealth Management division, to its employees stating the impact of Brexit on banks and asking them to move out of U.K.
Most of the employees who are relocating serve in client-facing and risk management related roles at its investment banking and asset management division and have been asked to complete the relocation before Brexit happens in March 2019. The memo further pointed out that JP Morgan is planning to augment its presence in Paris, Madrid, Milan and other European cities and the relocation step has been taken for the same.
5. Backed by a solid capital and liquidity position, banks are continuing to enhance shareholder value through efficient capital deployment activities. Recently, as part of its 2018 capital plan (approved by the Federal Reserve), PNC Financial’s (PNC - Free Report) board of directors announced a 27% hike in the company’s quarterly common stock dividend. The revised quarterly dividend now stands at 95 cents per share compared with the previous figure of 75 cents. This dividend will be paid on the next business day of Aug 5 to shareholders of record as of Jul 17.
Bank of the Ozarks’ board of directors also approved a hike in quarterly dividend. The company announced a dividend of 20 cents, an increase of 2.6% from the prior payout. The dividend will be paid on Jul 20 to shareholders on record as of Jul 13. This is the 32rd consecutive quarterly dividend increase by the bank. (Read more: Bank of the Ozarks Ups Dividend: Is the Stock Worth a Look?)
Here is how the seven major stocks performed:
Over the last four trading sessions, Bank of America (BAC - Free Report) and Citigroup were the major losers, with their shares decreasing 1% and 0.5%, respectively. However, shares of Capital One Financial (COF - Free Report) and PNC Financial inched up 0.8% and 0.4%, respectively.
In the past six months, shares of Citigroup and Wells Fargo have dropped 11% and 10.8%, respectively. Moreover, shares of U.S. Bancorp (USB - Free Report) declined 8.7%.
In the coming week, the focus will solely be on earnings releases. Some banks are scheduled to report second-quarter earnings in the next five trading days. Bank of the Ozarks will be reporting on Jul 11, while JPMorgan, Citigroup, Wells Fargo, PNC Financial and First Republic Bank (FRC - Free Report) are scheduled to release quarterly figures on Jul 13.
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