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Bank Stock Roundup: JPM, WFC & FITB Undertake Business Restructuring Initiatives

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Swayta Shah
·5 min read
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Over the last five trading days, performance of major bank stocks was bullish. The overall markets remained in the positive territory for most of the trading days, primarily due to favorable updates related to coronavirus vaccine and rekindled hopes for stimulus package.

Yet, a not so positive statement from Fed chair Jerome Powell over “challenging” next few months amid surge in infections, slowing economic recovery, and hurdles related to vaccine production and mass distribution weighed on investors’ sentiments to some extent.

With banks’ financials directly related to that of the health of the economy, there are chances of tough next few months for banks as well.

Nonetheless, the rate on the 10-year Treasury bond rose 8 basis points (bps) to 0.92% over the past five trading sessions. Further, the yield on the 30-year Treasury bond climbed 10 bps over the same time frame to 1.67%. Thus, steepening yield curve is expected to benefit banks’ net interest margins amid low interest rate environment.

Now talking about bank specific developments during the past five trading days, the Federal Deposit Insurance Corporation came out with third-quarter 2020 consolidated performance for its insured commercial banks and savings institutions. Net income of $51.2 billion was down 10.7% year over year. Yet, this reflected substantial improvement from first-half 2020 performance as coronavirus pandemic significantly hurt banks’ financials.

Additionally, major banks continued with their business expansion efforts, with primary focus on technology and global diversification. Further, banks have been streamlining operations to focus on core businesses.



(Read: Bank Stock Roundup for the Week Ending Oct 16, 2020)

Important Developments of the Week

1. Wall Street biggie, JPMorgan JPM is increasingly focusing on technological advancements to better serve its clients. In sync with this, the company is considering to acquire Britain-based online-only bank, Starling Bank Ltd. As the company plans to launch consumer bank in the U.K. early next year, the deal (if finalized) is expected to complement its strategy.

Further, JPMorgan’s asset management division — J.P. Morgan Asset Management — has signed an agreement to acquire Boston-based Fintech start-up, 55ip. The start-up helps financial advisors automate the creation of tax-efficient investment strategies. The financial terms of the deal were not revealed.

2. Wells Fargo WFC has agreed to divest Centurion Life Insurance to Bestow, a digital life insurance platform. Terms of the deal, pending regulatory approvals, were not disclosed. Centurion, an Iowa-based life insurance company has license in 47 states and the District of Columbia.

3. Fifth Third Bancorp FITB has inked a deal to acquire Hammond Hanlon Camp LLC. Terms of the deal have not been disclosed. The transaction is subject to regulatory approvals and is expected to close later this month. The acquisition will support the company’s efforts to further enhance its presence in the healthcare segment, which presently is one of the fastest growing segments of the economy.

4. JPMorgan plans to boost year-end compensation for its markets division by up to 20%, following an impressive performance during the year amid the pandemic. The news was reported by Bloomberg. This is in contrast to other Wall Street firms that are most likely planning to keep bonuses for traders flat, year over year.

5. JPMorgan is planning to double the number of private bankers in Singapore to better serve its Chinese clients. The bank aims to carry out this expansion drive over the next two years. These details were disclosed by James Wey, the head of Southeast Asia private banking of JPMorgan, in an interview with Bloomberg.

Price Performance

Here is how the seven major stocks performed:
 

Company

Last Week

6 months

JPM

0.0%

18.5%

BAC

0.3%

13.5%

WFC

2.5%

14.0%

C

-0.2%

8.5%

COF

4.0%

23.1%

USB

1.7%

19.0%

PNC

1.0%

20.6%



Over the past five trading days, Capital One COF and Wells Fargo have recorded the maximum gains, with their shares appreciating 4% and 2.5%, respectively. However, shares of Citigroup C have declined 0.2% in the same period.

Over the past six months, shares of Capital One and PNC Financial PNC have rallied 23.1% and 20.6%, respectively. Further, U.S. Bancorp USB rose 19%.

What’s Next?

Over the next five trading sessions, unless there is any significant change in the economic situation related to the coronavirus pandemic and any updates related to vaccine, the major bank stocks are likely to perform in a similar fashion.

Also, senior management of several major banks will be attending Goldman Sachs U.S. Financial Services Conference 2020 to be held virtually on Dec 8-9. Hence, there are chances that these banks will be providing updated/additional guidance for several important matters.

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JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
 
U.S. Bancorp (USB) : Free Stock Analysis Report
 
Citigroup Inc. (C) : Free Stock Analysis Report
 
Fifth Third Bancorp (FITB) : Free Stock Analysis Report
 
Capital One Financial Corporation (COF) : 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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