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Bank Stock Roundup: Fed Minutes, JPMorgan, Wells Fargo & BofA Dominate Headlines

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Bank Stock Roundup: Fed Minutes, JPMorgan, Wells Fargo & BofA Dominate Headlines

Indications of interest rate hike on the back of strong economy and business restructuring efforts by banks remain in focus.

Over the last five trading days, performance of banking stocks was optimistic. The primary highlight was the release of the Fed minutes of the Jul 31-Aug 1 FOMC meeting.

The latest minutes indicate that the central bank is likely to announce a rate hike in September. This cheered investors as banks are one of the biggest beneficiaries of higher interest rates.

Additionally, the Fed predicted that economic growth is likely to remain robust in the near term while at the same time warned that trade tensions could jeopardize the uptrend. Nonetheless, the reports that President Trump and China’s president Xi Jinping will likely hold trade talks in November, eased investor tensions to some extent.

Taking about company-specific headlines, banks continued with restructuring and streamlining initiatives. These efforts are expected to attract more business and support revenue growth. Moreover, resolution of probes and lawsuits related to legacy matters continued.


 

(Read: Bank Stock Roundup for the Week Ending Jul 20, 2018)

Important Developments of the Week

1. Raising competition to new highs among discount brokerage firms, JPMorgan JPM is likely to launch a new online investing service — You Invest — that would allow users to access stock research and conduct trades, free of cost. People who download the bank’s mobile banking app or are already using its website will be eligible for at least 100 free stock or ETF trades in the first year. (Read more: JPMorgan to Increase Competition by Offering Free Trades)

In another move to attract more business, JPMorgan is adding checking accounts to its Sapphire brand, per Reuters. This move will not only help in augmenting the brand but will also help in attracting and retaining the millennial customers. (Read more: JPMorgan Adds Checking Accounts to Expand Sapphire Brand)

2. Other news related to JPMorgan includes the bank’s intention to terminate nearly 100 employees in its Asset Management division. This was first reported by Wall Street Journal. Later on, the bank’s spokeswoman, Kristen Chambers confirmed the news in an e-mail statement. The layoffs represent about 1-2% of the Asset Management division’s strength and are across the globe. (Read more: JPMorgan to Lay Off Employees in Asset Management Division)

On the other hand, JPMorgan is planning to strengthen foothold outside the United States by catering to the banking needs of mid-sized companies. For this, the bank is hiring experienced professionals globally. This was reported by Bloomberg.

Citing people not wanting to be identified, Bloomberg reported that the Wall Street biggie is seeking to employ more bankers in Mexico, France, Spain and the U.K to carry on with the strategy.

Previously, in 2005, the company had undertaken a similar expansion move led by Todd Maclin, the former chief executive officer of JPMorgan’s commercial bank. However, it remained successful in capturing the market of local subsidiaries of U.S. companies abroad and not the foreign firms in those regions.

Last month, JPMorgan appointed Rafael Calderon, a former Barclays employee, to build corporate-client banking in Mexico.

The company is seeking to imitate its Mexico growth plans in some of the European countries, but the efforts taken in this direction are at initial stages, per the people. JPMorgan might also expand in Asia, provided the strategy works out well elsewhere.

JPMorgan has long been dealing with large multinationals outside the United States with minimal focus on smaller companies. As a result, revenues from international banking made up about 4% of the commercial bank’s total revenues in 2017, per its annual filing.

Further, JPMorgan in its investor day presentation held in February 2018 said that it is targeting to generate international revenues of $500 million annually in the commercial bank, over the next five years.

3. Relating to a discrimination lawsuit filed against Wells Fargo WFC by the city of Philadelphia in May 2017, U.S. District Judge Anita Brody asked the city to produce information about the 1,067 foreclosed-mortgage loans involved in the suit. Further, the city’s motion received rejection, under which it had demanded the court to induce the bank to provide documents and data of correspondent loans where the latter had purchased debt, although it did not play any role in the credit decision. (Read more: Wells Fargo Sees a Silver Lining in Discrimination Lawsuit)

4. Bank of America’s BAC unit Merrill Lynch has agreed to pay nearly $8.9 million to settle charges claimed by a U.S. regulator. The charges relate to the unit failing to disclose a conflict of interest with a third-party product provider, according to the Securities and Exchange Commission. (Read more: BofA's Merrill Lynch to Pay $8.9M to Settle Regulatory Claim)

5. In a voting held by Louisiana’s state bond commission, Bank of America and Citigroup C have been voted down from participating as underwriters of $600 million worth bonds sale to finance interstate projects. The commission led by Chairman and State Treasurer John M. Schroder, voted seven to six to ban two of the major Wall Street biggies due to the “restrictive gun policies” that both the banks had adopted earlier this year. (Read more: BofA, Citi Witness Ban From Louisiana Deal Over Gun Policies)

Price Performance

Here is how the seven major stocks performed:
 

Company

Last Week

6 months

JPM

0.0%

-1.2%

BAC

0.3%

-3.0%

WFC

-0.4%

0.5%

C

1.6%

-7.1%

COF

0.4%

1.4%

USB

1.0%

-1.9%

PNC

-0.9%

-9.5%


Over the last five trading sessions, Citigroup and U.S. Bancorp USB were the major gainers, with their shares rallying 1.6% and 1%, respectively. However, shares of PNC Financial PNC declined 0.9%.

In the past six months, shares of Capital One COF and Wells Fargo have rallied 1.4% and 0.5%, respectively. On the other hand, shares of PNC Financial and Citigroup have declined 9.5% and 7.1%, respectively.

What’s Next?

Over the next five trading days, performance of bank stocks will likely remain the same, unless any unprecedented events occur.

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JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
 
Bank of America Corporation (BAC) : Free Stock Analysis Report
 
U.S. Bancorp (USB) : Free Stock Analysis Report
 
The PNC Financial Services Group, Inc (PNC) : Free Stock Analysis Report
 
Citigroup Inc. (C) : Free Stock Analysis Report
 
Wells Fargo & Company (WFC) : Free Stock Analysis Report
 
Capital One Financial Corporation (COF) : Free Stock Analysis Report
 
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