Over the last five trading sessions, the performance of banks remained skewed toward the positive side. Restructuring initiatives and expansion efforts to improve efficiency, along with focus on core businesses, remained the key activities of banks that cheered investors up.
Also, like almost every week, lawsuits/probes for past business misconducts continued to make headlines. Though banks have been resolving cases, several investigations and litigations are yet to be settled. These will likely continue to adversely impact banks’ performance in the near term. However, since banks have been dealing with such issues upfront, investors do not seem too much concerned.
Another major development that dominated headlines in the last five trading sessions was the Greece impasse. This somewhat dampened the overall U.S. equity markets, including the bank stocks. Nevertheless, we believe this ambiguity would get cleared over the coming weeks and the market would be again focused on the domestic front, which has been showing signs of improvement. Banking stocks will also gain based on the continued measures to remain profitable.
(Read the last Bank Stock Roundup for Jun 12, 2015)
Recap of the Week’s Most Important Developments:
1. Lately, the banking industry is increasingly pursuing restructuring measures with services becoming more and more electronically inclined. Now Fifth Third Bancorp FITB has joined the fray and revealed its plans to consolidate/sell nearly 100 branches and around 30 other properties.
The proposed actions are likely to be completed by mid-2016.The plans come as part of Fifth Third’s review on customers’ choice and usage patterns throughout the bank’s network and all distribution channels (read more: Fifth Third to Optimize Branches, Aims $60M Savings)
2. After receiving necessary regulatory approvals earlier this month, BB&T Corporation BBT completed the acquisition of The Bank of Kentucky Financial Corporation. Notably, the cash-and-stock deal was announced in Sep 2014. The acquisition led to the addition of 32 retail branches in northern Kentucky and Cincinnati (read more: BB&T Acquires Bank of Kentucky: More Buyouts to Come?).
3. Citi Retail Services, a unit of Citigroup Inc. C entered into a new multi-year credit card agreement with recognized NY-based apparel brand Brooks Brothers. Citi Retail Services offers consumer as well as commercial credit card products, services, and retail solutions to national and regional retailers throughout the U.S. The business serves roughly 90 million accounts for a number of premier brands.
Per the terms, Citi will provide private label and co-branded credit cards for Brooks Brothers. Moreover, Citi will get hold of current Brooks Brothers’ card portfolio. Established in 1818, Brooks Brothers provides incomparable customer services establishing multi-generational relationships with customers.
In separate news, the escalating wealth profile in Asia has attracted a number of global banks to expand their business in the region. Sensing huge opportunities, Citigroup intends to double the number of wealth-management clients in Asia to 1 million over the next 5 years. Jonathan Larsen, the bank’s global head of retail banking as well as head of consumer banking for Asia Pacific, revealed the plans in a recent interview with The Wall Street Journal. (read more: Citi Plans to Double Asia Wealth Management Clients)
4. Addressing charges of the brokerage firm Peregrine Financial Group, Inc.’s customers, U.S. Bancorp’s USB core banking unit – U.S. Bank National Association – has agreed to pay $44.5 million to customers of Peregrine. However, the settlement awaits court approval and is not expected to impact the bank’s second-quarter 2015 results. The company was accused for inappropriately handling an account at the bank which was created for the benefit of Peregrine customers (read more: U.S. Bancorp to Resolve Peregrine Case Charges for $44.5M).
5. JPMorgan Chase & Co. JPM is said to be undergoing discussions with the U.S Securities and Exchange Commission (“SEC”) to resolve an investigation over the sale and use of proprietary products such as JPMorgan mutual funds in the company’s wealth management businesses. The news was first reported by the Wall Street Journal (read more: JPMorgan's Product Manipulation Probe: Fine Likely?).
Price Performance
Performance of bank stocks reflected optimism over the last five trading days. Here is how the seven major stocks performed:
|
Company |
Last Week |
6 months |
|
JPM |
0.8% |
11.2% |
|
BAC |
1.2% |
-2.8% |
|
WFC |
0.2% |
4.8% |
|
C |
-0.1% |
3.3% |
|
COF |
0.5% |
7.7% |
|
USB |
-0.2% |
-1.5% |
|
PNC |
0.3% |
6.5% |
In the last five trading sessions, BofA and JPMorgan were top gainers, with their shares advancing 1.2% and 0.8%, respectively. However, Citigroup and U.S. Bancorp fell marginally.
Over the last six months, JPMorgan and Capital One Financial Corporation COF were the top performers, with their shares advancing 11.2% and 7.7%, respectively. On the other hand, BofA and U.S. Bancorp declined 2.8% and 1.5%, respectively.
What's Next in the Banking Universe?
In the coming five days, we expect banks to perform in a similar manner, unless there is any major unprecedented event.
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