|Bid||52.67 x 1400|
|Ask||52.69 x 1800|
|Day's Range||52.46 - 52.78|
|52 Week Range||41.02 - 57.46|
|PE Ratio (TTM)||N/A|
|Beta (3Y Monthly)||1.38|
|Expense Ratio (net)||0.35%|
Though the latest steepening of the yield curve benefited bank ETFs on Sep 9, chances of volatility in the longer-term period may keep gains in bank ETFs at check.
Bank sector-related ETFs found strength Monday as government bonds pulled back and yields climbed on easing investor fears surrounding a U.S.-China trade war that has shown signs of de-escalation. On Monday, ...
Banks, given their attractive yields and reliable earnings, have been put forth by some market observers as a possible alternative to utilities. But there are some key differences investors should know about.
With Wells Fargo (NYSE:WFC) scheduled to announced second-quarter results on Tuesday, it's worth remembering that when the bank surprised investors a stronger-than-expected first-quarter profit, WFC stock trended lower on a reduced profit outlook.Source: Shutterstock It is also worth noting that Wells Fargo stock is at the same level as it was at the beginning of 2019. That compares with a 14% gain in the 25-bank-stock Invesco KBW Bank ETF (NASDAQ:KBWB), which shows WFC stock as its fourth-biggest holding at 7.88% weight. This is indicative of the point that market participants remain uncertain on the company's outlook.I believe that even if second-quarter results are largely in line with estimates, the stock can turn bearish on potentially weak outlook for 2019 and 2020.InvestorPlace - Stock Market News, Stock Advice & Trading Tips Rate Cut Impact on Wells FargoConsider the following: * The GDPNow indicator forecasts Q2 GDP growth at 1.4%. * The probability of recession as predicted by Treasury spreads is at 32.9%. This is at the highest level since the recession of 2008-2009. * The Conference Board's consumer confidence index declined to 121.5 in June, the lowest level since September 2017.Clearly, there is a meaningful slowdown and it is not surprising that the Federal Reserve has indicated that it might cut rates sooner. * 7 Retail Stocks to Buy for the Second Half of 2019 This is the first reason to be bearish on Wells Fargo.When 1Q19 results were announced, the company indicated that it expects net interest income to decline in 2019. According to the company:"Several factors have driven shifts in our view, including a lower absolute rate outlook, a flatter curve, tightening loan spreads resulting from a competitive market with ample liquidity and continued upward pressure on deposit pricing. We now expect NII will decline 2% to 5% this year compared with 2018."With a possible 50- to 75-basis-point interest rate cut likely within the next six-12 months, Wells Fargo is likely to endure further margin compression. Decline in NII will translate into WFC stock trending lower as EPS declines.Expansionary monetary policies will imply ample liquidity for consumers and businesses. A competitive landscape would mean that banks have to keep rates attractive for core business growth.Therefore, a clear downturn in the economy is negative for Wells Fargo stock and I believe that the stock can move lower after being sideways for so far in 2019. Over-leveraged ConsumersAn interesting point to note is that household debt balance peaked at $12.68 trillion in the third quarter of 2008. The subsequent financial crisis translated into deleveraging by consumers.For the first quarter of 2019, household debt balance was at $13.67 trillion, a full trillion dollars higher than the 2008 peak. Clearly, consumers are over leveraged.With gradual economic slowdown and decline in consumer confidence, another wave of deleveraging can't be ruled out.I am not suggesting a potential crisis for the banking sector, but interest income can decline in the coming quarters. What holds true for consumers also holds true for businesses. If leveraged spending declines, so will leveraged investments. * 10 Stocks to Sell for an Economic Slowdown While these are macroeconomic factors rather than characteristics specific to Wells Fargo, they will still dominate headlines and stock trend in the coming quarters.Importantly, these macroeconomic factors will result in net interest income margin compression for Wells Fargo. Additionally, credit growth will decelerate and the core business growth will be impacted. Bottom Line on Wells Fargo StockI certainly don't intend to paint a very bearish scenario that draws comparison with the 2008-2009 crisis. Even in a deleveraging scenario, Wells Fargo stock could benefit from a healthy balance sheet.The company has created sustained shareholder value through dividends and robust share repurchase. While current dividend payout can sustain, the company's earnings growth is likely to be under stress and that is likely to take WFC stock lower.Therefore, more than 2Q19 earnings numbers, I would look for guidance on net interest income margin for the coming quarters. That will dictate stock direction along with prospects of consumer deleveraging.As of this writing, Faisal Humayun did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Stocks to Buy for Less Than Book * 7 Marijuana Stocks With Critical Levels to Watch * The 10 Best Dividend Stocks to Buy for the Rest of 2019 and Beyond The post Possible Margin Compression Turns Wells Fargo Stock Watchers Bearish appeared first on InvestorPlace.
Cheaper valuation, better earnings growth prospects, solid performance in Stress Test, dividend hike announcements and less chances of a rate cut should position financial ETFs in a good spot in 2H.
As has been widely reported in the recent days, the results from the Federal Reserve's Comprehensive Capital Analysis and Review, or CCAR, were mostly impressive, providing an avenue for major domestic banks to significantly increase capital returns to shareholders, both in the form of dividends and buybacks. CCAR “evaluated the capital planning processes and capital adequacy of 18 of the largest banking firms, including the firms' planned capital actions, such as dividend payments and share buybacks,” said the Federal Reserve. The Invesco KBW Bank ETF (KBWB) is one exchange traded fund poised to benefit from those higher dividends and larger buybacks.
The results of the Federal Reserve’s Comprehensive Capital Analysis and Review, or CCAR, are in and the stage is now set for major U.S. banks to boost shareholder reward programs, including share buybacks ...
Goldman Sachs Group (GS), Bank of America (BAC), and JPMorgan Chase (JPM) were up 2% to 3% in morning trading, after news Thursday that the lenders had passed the Comprehensive Capital Analysis and Review, or CCAR, the second of two stress tests administered annually by the Federal Reserve. “CCAR includes both a quantitative evaluation of a firm’s capital adequacy under stress and a qualitative assessment of its abilities to determine its capital needs,” according to Barron’s. “It takes into account the actual capital plans, including dividends and buybacks, that the individual firms are seeking. Jason Goldberg, senior equity analyst at Barclays said on CNBC, “If you look at the top 20 banks the medium bank is going to buy back over 8% of it shares over the next 12 months.
U.S. bank stocks and sector-related exchange traded funds were among the best performers Friday after the Federal Reserve announced the biggest U.S. banks were stable enough to start lower their capital ...
The results of the Federal Reserve’s Comprehensive Capital Analysis and Review, or CCAR, are expected to be released on June 27 and that could lead to significant improvements in shareholder rewards at some of the nation's largest banks. “The results of the stress tests, which examine the capital adequacy of each company, are mandated by the Dodd-Frank Act. Since the end of the global financial crisis, during which many stocks were egregious dividend offenders, the financial services sector has been a leader in terms of domestic dividend growth.
The results of the Federal Reserve’s Comprehensive Capital Analysis and Review, or CCAR, are soon to be released and that could mean higher dividends and increased share repurchases for a slew of domestic ...
The downtrend in financial services is on pause, at least for the time being, with Bank of America (NYSE:BAC) leading the June mini-rally. BAC stock is up 4.4% for the month, while the S&P 500 index (NYSE:SPY) has gained 2.5%.Source: Shutterstock Talk of interest rate cuts by Federal Reserve chief Jerome Powell ignited a strong rebound in stocks. Fundamentally, rate cuts hurt interest rate spread for banks and weaken profits. Conversely, a growth in economic activity also brings more deals for banks. Further speculation of U.S.-China trade tensions easing is sparking stock rallies. Yet even though investors cannot count on a resolution, they should consider buying Bank of America for many other ideas. Leading Financial Services FirmAt a Deutsche Bank Global Financial Services conference at the end of May, Bank of America highlighted its leadership in consumer financial services. It has 63 million clients, 16,000 ATMs, and is the top 20 most-profitable firm in the S&P 500.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * The 10 Best Stocks for 2019 -- So Far In the last three years, the bank grew revenue by 20%, to $37.6 billion at the end of 2018. It achieved this strong growth in four ways. First, it repaired the client experience, rebuilding loyalty. Second, it offered a customized client experience through client segments. Third, it embraced high tech. Fourth, it replaced core infrastructure. This led to an impressive 21 consecutive quarters of positive operating leverage. Contrarian Client FocusNearly half (45%) of Bank of America's clients are retail clients with an annual income of less than $50,000. BAC takes a no-nonsense approach with this group, minimizing fees while delivering services through its digital capabilities. By keeping costs in maintaining each customer low, the bank has the flexibility to offer value-add education. BAC's "Better Money Habits" is an example of such an initiative.Small business owners account for around 20% of its clients. This group has annual business revenue of under $5 million. So, as their needs grow, BAC connects them with its client professionals.Preferred clients make up the remaining 35% of clients. This group has more than $100,000 in assets and happens to skew toward the older crowd. Here, BAC offers advice and guidance through its network of client professionals. Digitization UnderwayMarkets tend to have a willingness to pay a big premium for electronic payment firms like PayPal Holdings (NASDAQ:PYPL) or Square (NYSE:SQ). BAC is already servicing its clients with a digital bank offering. The firm is ranked 1 in share rankings for consumer deposit share in the U.S. Its digital bank allows clients to access their account securely, through Touch ID and debit lock/unlock. Payments can be processed through Zelle, Mobile Wallet, and Mobile Check Deposit. Bank Branches UpgradedDespite investing in its digital bank, BAC is not ignoring its brick-and-mortar network. It continues to invest in and expand the branches. The upgraded physical banks give customers a touchpoint with a staff of professionals, should they need face-to-face support. BAC's financial center network is so far ahead of the competition that the share of deposits/financial centers is 1.75x-2x while competitors only operate at 0.75x-1.5x. Growth Opportunity AheadBank of America will continue investing in both its digital bank and financial center network, integrating the two. That will simplify the offerings for customers. Similar to other banks, BAC will invest in high tech and high-touch capabilities. * 10 Stocks to Buy That Could Be Takeover Targets Macroeconomic headwinds have yet to hurt BAC's business, although the bank noted a slight slowdown in activity. But even though the economy is growing at 2% instead of 3%, consumers still account for two-thirds of the economy. And with low unemployment, the banking business is still very strong. Takeaway on BAC StockBAC stock would have traded in the $30 - $32 range had the markets not sold off in May. Analysts are very bullish on Bank of America stock and have a price target of $35 a share. Plus, with the stock paying a dividend yielding 2.26%, investors seeking exposure to the bank sector should consider this bank today. Investors should also take note of the Invesco KBW Bank ETF (NasdaqGM:KBWB), which has BAC stock as its fourth-largest holding in its 25-stock bank shares portfolio.Disclosure: As of this writing, the author did not hold a position in any of the aforementioned securities. More From InvestorPlace * 4 Top American Penny Pot Stocks (Buy Before June 21) * 7 S&P 500 Dividend Stocks to Buy at Least Yielding 3% * 7 Stocks to Buy That Don't Care About Tariffs * 5 Healthcare Stocks to Pick Up From the Wreckage Compare Brokers The post Why Bank of America Stock Looks Set To Retake The $30 Level appeared first on InvestorPlace.
JPMorgan (NYSE:JPM) reported its first-quarter results on Apr. 12. JPM stock gained almost 5% on the news. Source: Shutterstock InvestorPlace - Stock Market News, Stock Advice & Trading TipsCitigroup (NYSE:C) announced mixed results before the markets opened on Monday. Its share price barely moved. As far as large bank stocks, JPM stock appears to be in a league of its own. Can any other bank stock touch it? * 10 S&P 500 Stocks to Weather the Earnings Storm Let's consider a few different financial metrics to determine if Jamie Dimon's baby is the obvious choice among large bank stocks. What Is Large?Before we consider our options, it's essential that we come up with some definition of large.As I scan a list of bank ETFs, the Invesco KBW Bank ETF (NYSEARCA:KBWB) catches my attention because of its laser-like focus on 24 bank stocks. JPM stock is its number one holding, accounting for 8.56% of its value. KBWB tracks the performance of the KBW Nasdaq Bank Index, which in turn tracks the performance of the leading banks and thrifts that are publicly traded in the U.S. They are primarily sizable, national, money-center banks, with a few regional banks and thrift institutions thrown into the mix. The index uses a float-adjusted, market cap-weighting methodology. The stocks that are weighted lower generally have smaller market caps. Evaluating JPM's PerformanceThe easiest thing to do would be to compare JPMorgan's Q1 results to those of Citigroup.However, that wouldn't be any fun. So, instead, I'm going to compare JPM to my favorite U.S. bank, SVB Financial (NASDAQ:SIVB), where entrepreneurs and innovators go for their financial services needs, both business and personal. Unfortunately, SIVB doesn't report its first-quarter results until Apr. 25, so I'll use the banks' 2018 numbers to compare them. The NumbersFinancial Metric JPMorgan SVB Financial Net Interest Margin 2.51% 3.57% Return on Average Assets 1.24% 1.76% Efficiency Ratio 61.21% 45.50% Tier 1 Capital Ratio 13.7% 13.4% Return on Equity 13% 20.57 By looking at these five financial metrics, it's clear that SIVB stock is very attractive relative to JPM stock. However, there are a couple of caveats to these numbers.First, SVB Financial is much smaller than JPMorgan.In 2018, SIVB had $2.6 billion of revenue. That's about 2% of JPMorgan's total revenue. JPM had $2.6 trillion of total assets, compared to $55.2 billion for SIVB. The 0.52 percentage-point difference in the banks' return on average assets isn't a big deal, since JPM is so much bigger than SIVB. For example, if JPMorgan had SIVB's return on average assets in 2018, it would have generated $45.7 billion of net income, $13.3 billion more than it did. However, as it stands, JPMorgan's net income in 2018 of $32.5 billion was 59% of SVB Financial's entire asset base. I'm sure Jamie Dimon would love to have some of SIVB's superior numbers, but given JPM's size, that's not very realistic.The second caveat is that SIVB is geared toward commercial banking. In 2018, out of $27.5 billion of its average loans outstanding, 50.8% were worth $20 million or more. Consumer loans and mortgages accounted for just 10% of the bank's total loan portfolio. JPMorgan's total consumer-credit portfolio, including credit cards, was $1.2 trillion, or 46% of its total assets. It focuses much more on retail banking than SIVB. When economies turn south, that can work against JPM stock. But for now, with a relatively strong economy, JPM and JPM stock are sitting pretty. The Bottom Line on JPM StockIf you're interested in owning one of America's biggest and best banks, I don't think there's a better choice than JPMorgan stock.However, if you want to own a piece of one of America's best banks, period, SIVB is a desirable alternative, in my opinion. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Stocks to Buy for Spring Season Growth * This Is How You Beat Back a Bear Market * 7 Dental Stocks to Buy That Will Make You Smile Compare Brokers The post Is JPMorgan Stock the Obvious Choice Among Large Banks? appeared first on InvestorPlace.
A slight flattening of the yield curve may hurt bank stocks' profitability, but underwriting of several unicorn IPOs should help these financial ETFs.
After a decade-long bull market, it's getting more and more difficult for equities investors to identify value opportunities. Fortunately, Citigroup (NYSE: C) is one of a handful of stocks that stands out as relatively cheap. Conditions for U.S. banks are better than they've been in years. C stock has double the gain of the S&P 500 index so far in 2019. It may soon get even hotter.Source: Shutterstock Even after rallying 23.8% , Citigroup stock still looks cheap. Bank stocks struggled in 2018. Citigroup stock was slammed. Shares were down more than 30% last year compared to a 18.6% drop in the 25-stock Invesco KBW Bank ETF (NASDAQ:KBWB)Citigroup's forward price-to-earnings ratio is just 7.5, one of the lowest valuations in the entire S&P 500. It's also the lowest among its "big four" banking peers -- Bank of America (NYSE: BAC), J.P. Morgan Chase (NYSE: JPM) and Wells Fargo (NYSE: WFC) -- by a wide margin. When growth projections are factored in, Citigroup's price-to-earnings-to-growth (PEG) ratio of 0.57 is extremely low. It's roughly in-line with Bank of America's 0.54 PEG, but well below J.P. Morgan (1.23) and Wells Fargo (1.05).InvestorPlace - Stock Market News, Stock Advice & Trading TipsIn terms of price-to-sales ratio, it's not even close. Citigroup stock trades at a 2.23 sales multiple, roughly half the valuation of Bank of America (4.27) and J.P. Morgan (4.58) and far below Wells Fargo (3.66). * 7 IPOs to Get Excited for in 2019 Finally, Citigroup is the only one of the big four banks to trade below book value. Citigroup's price-to-book value is 0.9. The next closest of its peer group is Bank of America at 1.22. In other words, Citigroup stock price is below the aggregate per-share value of its assets. Banking Conditions Are Getting BetterFor much of the past decade, the business of banking in the U.S. has been an uphill battle. Some might say rightfully so. Banks have faced unprecedented regulatory oversight following the 2008 financial crisis. In addition, near-zero interest rates have made it extremely difficult for banks to grow profits.When interest rates are low, banks have very little wiggle room on their net interest margins, the difference between the rates they charge to borrowers and the rates they pay out to depositors. Lack of wiggle room results in lower profits, which have been hard to come by until the past couple of years.To be sure, the Federal Reserve has been raising interest rates in recent quarters. However, rates remain below historical levels. To make matters worse, the Fed recently indicated is may be putting rate hikes on hold in 2019.Bank investors may be disappointed that conditions aren't better for big banks at this point. But there's no question they are better than they were. Banks may not be seeing any more rate hikes in the near future. But the Fed's fourth-quarter rate hike will not be reflected in Citigroup's numbers until the first quarter. In addition, Citigroup cut costs in the fourth quarter and improved its efficiency despite a difficult fixed-income trading environment.In addition, after paying essentially no dividend for years following the financial crisis, the 2.8% yield on Citigroup stock is now quite appealing. Wall Street Skeptics FadingFinally, after years of skepticism, Wall Street analysts have slowly been joining the bullish camp on Citigroup stock. In February, Jefferies analyst Ken Usdin upgraded Citigroup to "buy" and said a favorable global environment for institutional investors should pay off for C stock investors. Usdin also praised the company's progress in Latin America. He said the stock's risk-reward is "skewed positive, especially if Citi starts showing tangible progress" toward its long-term goal of 13.5% return on average tangible common equity by 2020. He's currently ranked 27th out of 5,233 analysts on TipRanks. * 7 Top-Rated Stocks to Buy for March Bank of America analyst Erika Najarian is also bullish on Citigroup stock. Najarian recently said Citi's efficiency improvements are key for the stock going forward. "C cannot control how the market discounts global risk in the stock, but management can certainly execute on efficiency gains to improve relative valuation," Najarian wrote. She expects a 1.03% efficiency ratio improvement from Citigroup in 2019 and another 2% improvement in 2020. She said that degree of improvement should get Citigroup stock at least on par with book value. Further improvements could get the stock in-line with the book value premiums of its peer group. C Stock's Next CatalystIn the near-term, the next major catalyst for Citigroup stock that Wall Street will be watching are the results of the annual big bank stress tests. Najarian said this year's test conditions were slightly more difficult than expected. However, if Citigroup can pass the test and get approved for an even more aggressive capital return plan this year, it could really get investors attention. At some point, C stock will force investors to pay attention to its low valuation.As of this writing, Wayne Duggan did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 5 Retail Stocks Ready to Break Out * 7 Strong Buy Stocks the Street Loves * 10 Best Stocks to Buy and Hold Forever Compare Brokers The post Citigroup Stock Is A Rare Value Among Expensive Financial Services Shares appeared first on InvestorPlace.