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Over the past five trading sessions, performance of major bank stocks has been bullish. The overall markets remained in the positive territory for most of the trading days, mainly due to selective stimulus prospects and gradual economic revival, with bank stocks reflecting the uptrend.
With earnings season starting early next week, major banks are in the spotlight. While there have been expectations of a decline in net interest income, mainly due to weak loan demand and low rates, banks are likely to get support from decent performance in investment banking, mortgage and trading.
Also, investors are keen to know what management expectations are for the rest of the year and the next year.
Talking about company-specific headlines, banking regulators fined Citigroup C on account of lax risk management process. Further, banks continued with their restructuring and streamlining initiatives, with focus on digitization. Also, job cuts, which were paused by the banks amid the pandemic, are being resumed as part of cost saving efforts.
(Read: Bank Stock Roundup for the Week Ending Sep 4, 2020)
Important Developments of the Week
1. Citigroup has been slapped with a $400 million penalty by The Office of the Comptroller of the Currency (“OCC”) for long-standing deficiencies in risk management and internal controls processes. Following this, the bank has to undertake certain comprehensive corrective actions including the OCC’s approval before undertaking any significant acquisitions and submit a plan regarding improvement of oversight within 120 days.
2. At a time when a number of top companies have put the brakes on job cuts and are trying to offer stability to employees amid the coronavirus pandemic, Wells Fargo WFC has done otherwise. Per a Bloomberg report, the bank resumed its retrenchment process under the mounting pressure for cost reduction and has terminated more than 700 commercial banking jobs.
3. Bank of America BAC launches its digital financial planning tool — Life Plan. Customers will be able to access the Life Plan program through the bank’s mobile app and website. With the help of this, clients will be in a position to select and prioritize their most important goals within areas like finance, family, health, home, work and leisure.
4. As part of its efforts to expand presence outside the United States and increase share in asset servicing, The Bank of New York Mellon Corporation BK has entered into an alliance with Saudi Arabia’s largest asset manager and investment bank, NCB Capital, which is a unit of National Commercial Bank.
Here is how the seven major stocks performed:
Over the past five trading days, U.S. Bancorp USB and Capital One have recorded the maximum gains, with their shares jumping 7.4% and 7.1%, respectively. Also, shares of Bank of America have rallied 5.5% in the same period.
In the past six months, shares of Capital One and PNC Financial PNC have surged 42.7% and 19.8%, respectively. However, Wells Fargo declined 14.4% in the same time frame.
Over the next five trading days, third-quarter 2020 earnings will begin in full swing, with Wall Street biggies – JPMorgan JPM and Citigroup – kick starting the same on Oct 13. These will be followed by Bank of America, Wells Fargo, PNC Financial and U.S. Bancorp on Oct 14, while Truist Financial will report on Oct 15.
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JPMorgan Chase Co. (JPM) : Free Stock Analysis Report
U.S. Bancorp (USB) : Free Stock Analysis Report
Bank of America Corporation (BAC) : Free Stock Analysis Report
Citigroup Inc. (C) : Free Stock Analysis Report
The Bank of New York Mellon Corporation (BK) : Free Stock Analysis Report
The PNC Financial Services Group, Inc (PNC) : Free Stock Analysis Report
Wells Fargo Company (WFC) : Free Stock Analysis Report
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