Over the last four trading days, overall market sentiments remained optimistic, and this was also reflected in the performance of banking stocks. Legal issues continued to crop up, but banks carried on with their efforts to expand in newer areas with the aim to improve efficiency. These efforts were enough to cheer up investors.
With the earnings season starting early next week, investors are eagerly waiting to catch on the financial performance of banks over the past three months. During this period, banks have undertaken various measures, which, along with buoyancy in the overall economy, are expected to get reflected in the results.
(Read the last Bank Stock Roundup for Mar 27, 2015)
Recap of the Week’s Most Important Developments:
1. Citigroup Inc. C is likely to face another blow as regulators are beefing up investigations pertaining to the alleged manipulation of the foreign exchange (“FX”) market by several global banks. Per a Bloomberg report, the U.S. Department of Justice (“DOJ”) is seeking Citigroup’s main banking subsidiary – Citibank NA – to plead guilty to criminal charges related to fixing of FX markets (read more: DOJ Targets Citigroup Unit for Guilty Plea in Forex Probe).
2. Citigroup continues to face setbacks related to its Argentine bond payment. After suspending the company from conducting capital-market operations in the country, the government of Argentina filed a lawsuit against the New York-based bank.
The Argentine government stated that since Citigroup reached an agreement last month with certain hedge funds that are engaged in a long-standing legal tussle with the country, it was compelled to sue the company. Axel Kicillof, the Economy Minister of Argentina, said that the government was seeking a ruling that would nullify the agreement in Argentine courts. Kicillof declared that the deal between Citgroup and the holdout creditors "violated and interfered with regulations governing our public debt." (Read more: Citi Sued by Argentina over Agreement with Holdout Creditors)
3. The thaw in relation between the U.S. and Cuba has encouraged major banks to resume banking operations in Cuba. At a forum related to the Summit of the Americas in Panama, Francisco Aristeguieta, the CEO of Citigroup's operations in 23 Latin American countries, stated that the bank is considering the revival of business in Cuba.
Notably, Citigroup’s return to the country will take time due to political reasons as well as stringent regulations that Cuba has in place.
4. As part of its 2015 capital plan (approved by the Federal Reserve), The PNC Financial Services Group, Inc. PNC announced a 6% dividend hike. The bank will be paying 51 cents per share as quarterly cash dividend on May 5, 2015, to shareholders of record as on Apr 15. Concurrently, the company announced redemption of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series K worth $500 million on May 4 (read more: PNC Financial Raises Dividend, to Redeem Preferred Stock).
5. The attempt to close the long-awaited merger deal between M&T Bank Corp. MTB and Hudson City Bancorp, Inc. has fell through yet again. As revealed by the banks, the Federal Reserve had informed M&T Bank that it will not be able to complete its review on the merger application before Apr 30, and hence the merger deal would not be closed by May 1 as previously planned (read more: M&T, Hudson City Merger Halted Again as Fed Delays Review).
Price Performance
Overall, the performance of banking stocks remained skewed toward the optimistic side. With the industry starting to report first-quarter results next week, investors seem less concerned about banks’ performance as they have undertaken several measures lately to pep up their performances. Also, with legal issues becoming part and parcel of major banks, investors are less wary about the same unless something unprecedented comes up. The banking stocks showed a marginal upward price movement.
|
Company |
Last Week |
6 months |
|
JPM |
1.7% |
5.4% |
|
BAC |
1.3% |
-4.7% |
|
WFC |
0.2% |
7.4% |
|
C |
1.0% |
2.0% |
|
COF |
0.0% |
-0.6% |
|
USB |
0.6% |
8.6% |
|
PNC |
1.1% |
13.9% |
In the last four trading sessions, JPMorgan Chase & Co. JPM and Bank of America Corp. BAC were the top gainers, with their shares raising 1.7% and 1.3%, respectively.
Over the last six months, PNC Financial and U.S. Bancorp USB were the top performers, with their shares advancing 13.9% and 8.6%, respectively. On the other hand, BofA declined 4.7%, while Capital One Financial Corp. COF inched down 0.6%.
What's Next in the Banking Universe?
Both JPMorgan and Wells Fargo & Company WFC are reporting first-quarter results on Apr 14, 2015.
These will be followed by BofA, PNC Financial and U.S. Bancorp on Apr 15, while KeyCorp and Citigroup will be announcing results on Apr 16. Hence, the coming week will be quite a busy one for the industry.
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