Over the last five trading days, bank stocks have put up a dismal performance as intensifying trade war fears continued to weigh on investor sentiments. Also, first-quarter 2018 GDP numbers were lowered after revision to 2% from 2.2% reported in May.
Also, on Thursday, the Federal Reserve released results of its annual Comprehensive Capital Analysis and Review stress test. The central bank approved capital plans of 32 of 35 biggest banks in the United States.
Of the three remaining banks, Deutsche Bank’s DB capital plan was rejected while that of Goldman and Morgan Stanley will have to be maintained at the current levels. Further, State Street received conditional approval and is required to enhance its analysis of hypothetical lending risks with big banks.
While the approval of capital plans cheered investors, it was not enough to mitigate the effects of trade war.
Nevertheless, coming to company-specific news, streamlining and expansion of operations continued to dominate the headlines for the last five trading sessions. Apart from that, banks’ efforts to further digitize operations continued.
(Read: Bank Stock Roundup for the Week Ending Jun 22, 2018)
Important Developments of the Week
1. As part of its efforts to reorganize the investment banking operations in China, JPMorgan JPM announced plans of increasing headcount of its Chinese investment banking team by nearly 40-50%. The target is expected to be achieved within the next two to three years. (Read more: JPMorgan Expands China Investment Bank, Headcount to Rise)
2. As part of its strategy to exit non-core operations across the globe, JPMorgan’s subsidiary — JPMorgan International Finance — is selling its 7.5% stake back to Saudi Investment Bank for 759.3 million riyals ($203 million). The transaction, expected to close by September-end, is still subject to regulatory approvals. (Read more: JPMorgan Unit to Divest 7.5% Stake in Saudi Arabia Bank)
3. JPMorgan has rolled out its digital only bank — Finn by Chase — to consumers nationwide to fulfil their everyday banking needs through smartphones. The app will be available to Android users by 2018-end. (Read more: JPMorgan Launches its Online-Only Bank Nationwide)
4. Wells Fargo WFC is slashing 100 jobs in its mortgage operations branch located in Fort Mill due to subdued activity in U.S. housing market. The bank took this decision to better align staff levels with present sales volume. (Read more: Wells Fargo Cuts Jobs on Declining Mortgage Originations)
Additionally, Wells Fargo has laid off another 130 employees who worked in Twin Cities mortgage as a response to declines in origination volume, foreclosures and rising mortgage rates. On the other hand, Wells Fargo has introduced a new credit card rewards program to compete with other major banks that provide benefit-heavy cards. (Read more: Wells Fargo Cuts Mortgage Jobs, Raises Credit Card Rewards)
Price Performance
Here is how the seven major stocks performed:
|
Company |
Last Week |
6 months |
|
JPM |
-0.8% |
-1.6% |
|
BAC |
-1.1% |
-3.0% |
|
WFC |
-0.6% |
-11.3% |
|
C |
-0.5% |
-10.1% |
|
COF |
-2.7% |
-7.0% |
|
USB |
-1.6% |
-6.9% |
|
PNC |
-2.7% |
-6.0% |
Over the last five trading sessions, Capital One Financial COF and PNC Financial PNC were the major decliners, with their shares falling 2.7% each. Also, shares of U.S. Bancorp USB declined 1.6%.
In the past six months, shares of Wells Fargo and Citigroup C have lost 11.3% and 10.1%, respectively. Further, Capital One stock has declined 7%.
What’s Next?
Over the next four trading days, bank stocks are expected to continue performing in a similar manner as trade war related concerns will likely weigh on investors sentiments.
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