Over the last five trading days, performance of banking stocks was bullish. The promised policy change related to tax reforms moving forward on the administration agenda seem to be one of the reasons for this optimistic stance. Moreover, decent Q1 earnings for banks and their upbeat outlook cheered the investors.
With two consecutive interest rate hikes by the Fed, banks’ results this week managed to beat estimates with their top-line strength. Further, credit costs were manageable while loans witnessed a slowdown.
Also, operating expenses remained elevated mainly reflecting a corresponding rise in revenues. Apart from this, high spending on technology and other market development initiatives led to higher costs.
(Read: Bank Stock Roundup for the week ending Apr 21, 2017)
Important Developments of the Week
1. SunTrust Banks, Inc.'s STI first-quarter 2017 adjusted earnings of 87 cents per share outpaced the Zacks Consensus Estimate of 84 cents. Results reflected an improvement in net interest income and non-interest income. However, an increase in provision for credit losses and higher operating expenses were the downsides. (Read more: SunTrust Beats on Q1 Earnings, Provisions & Costs Rise)
2. Fifth Third Bancorp FITB reported first-quarter 2017 earnings per share of 38 cents, in line with the Zacks Consensus Estimate. The results were supported by an increase in net interest income and lower provisions. Improved credit quality was a tailwind. However, lower non-interest income was an undermining factor. (Read more: Fifth Third Posts In-Line Q1 Earnings, Revenues Lag)
3. Capital One Financial Corporation’s COF first-quarter 2017 adjusted earnings of $1.75 per share lagged the Zacks Consensus Estimate of $1.93. Lower-than-expected results were due to a fall in non-interest income, an increase in provisions and rising expenses. However, higher net interest income and easing margin pressure supported the results to some extent. (Read more: Capital One Lags Q1 Earnings as Costs Rise, Stock Down)
4. Other than the earnings releases, last week’s important news included granting of banking license to Citigroup Inc. C by Saudi Arabia banking regulator. The license permits the company to perform capital markets businesses in the country. Per the company statement, the operation, branded Citigroup Saudi Arabia, will offer a full range of investment banking services including debt and equity capital markets operations.
Price Performance
Here is how the seven major stocks performed:
|
Company |
Last Week |
6 months |
|
JPM |
3.7% |
26.5% |
|
BAC |
4.1% |
39.9% |
|
WFC |
2.7% |
17.3% |
|
C |
2.9% |
18.9% |
|
COF |
-0.4% |
10.0% |
|
USB |
2.8% |
16.2% |
|
PNC |
2.4% |
26.8% |
In the last five trading sessions, Bank of America Corp. BAC and JPMorgan Chase & Co. JPM were the major gainers, with their shares increasing 4.1% and 3.7%, respectively. However, Capital One stock marginally declined.
BofA and The PNC Financial Services Group, Inc. PNC were the best performers over the last six months, with their shares gaining 39.9% and 26.8%, respectively. Moreover, JPMorgan shares jumped 26.5%.
What’s Next?
In the coming five days, share price performance for bank stocks is likely to follow similar trend, unless there is any unprecedented event.
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