Bank Stock Roundup: Economic Rebound Hopes High Amid Coronavirus Woes, Citi in Focus

Performance of major bank stocks over the last five trading days has painted an encouraging picture. Things have been looking up for the bond market, with U.S. Treasury yields approaching the recent high, following upbeat economic reports. Notably, better-than-expected data on job losses and the services sector has perked up markets, boosting investor optimism over an anticipated economic rebound.

Specifically, the rate on the 10-year Treasury bond has surged to 0.818%, marking the highest level since this March. Further, the yield on the 30-year Treasury bond has climbed to 1.623%.

Further, though mortgage rates inched up slightly this week, the same remain at a record low on the coronavirus mayhem. Therefore, the housing sector is expected to get a boost from improvement in origination volumes as well as refinancing activities. Thus, banks with mortgage banking operations will likely record improvement in mortgage revenues.

Talking about company-specific headlines, banks continued with their restructuring and streamlining initiatives. These efforts are anticipated to attract more business and fuel revenue growth. Additionally, with advancement in technology, increase in digital offerings by major banks was at the peak. Apart from these, resolution of probes and lawsuits related to legacy matters continued.

 

(Read: Bank Stock Roundup for the Week Ending Apr 24, 2020)

Important Developments of the Week

1. Major banking giants are moving on with the restructuring moves amid the coronavirus-related mayhem to boost revenues. Citigroup C is in the process of expanding its commercial banking operations across Europe, Middle East and Africa (EMEA). The move comes on the heels of the opportunities foreseen as competitive firms moving out from the region after witnessing negative impacts of the coronavirus-induced recession. Per Citigroup’s plans, the business lending division aims to cater to companies with annual turnover between $25 million and $2.5 billion. Also, new hires and office launches in various Western European countries, by the end of this year, are in the pipeline.

Citigroup is also mulling to create a new strategic advisory group in its investment banking division. The group is likely to consist of nearly 80 bankers and will be formed by merging the financial strategy group and the shareholder advisory and data-science group. With the help of its data capabilities, the group would advise customers on their asset base, corporate finance structure and tax strategies.

2. The Bank of New York Mellon Corporation BK announced its plan to set up an FX pricing and trading engine in Singapore. This will be in collaboration with the Monetary Authority of Singapore (MAS). The bank will create a low-latency electronic FX infrastructure, which will offer its clients efficient price-discovery services and improved execution quality. Though the operations will be initially conducted only for spot contracts, the same will be later extended to deliverable and non-deliverable forwards and swaps. Darren Boulos, head of FX Sales and Trading in Asia-Pacific at BNY Mellon, stated that the recent development will further enhance the company’s global FX capabilities, on which it has been concentrating for the past four years. Local support will also help offer additional liquidity to BNY Mellon’s clients.

3. Wells Fargo WFC plans to halt loans provided to the independent car dealer clients due to the coronavirus pandemic’s economic impact. The article quoted Natalie Brown, spokeswoman for Wells Fargo, “As a responsible lender, we also have an obligation to review our business practices in light of the economic uncertainty presented by COVID-19 and have let the majority of our independent dealer customers know that we will suspend accepting applications from them,”. Brown added, “The independent dealers we will continue doing business with are those with deep, long-standing relationships with Wells Fargo.”

4. JPMorgan JPM and Barclays PLC BCS have been asked to pay a total of $20.7 million in order to settle claims by investors that the banks colluded to manipulate the Mexican government bond market. Along with JPMorgan and Barclays, seven other banks have been accused of wrongdoing. However, JPMorgan and Barclays are among the first of the nine banks to settle the proposed class-action lawsuit. Notably, JPMorgan will pay $15 million, while Barclays is shelling out $5.7 million. Nevertheless, while agreeing to settle the claims, both banks denied any wrongdoing.

Price Performance

Here is how the seven major stocks performed:

Company	Last Week	6 months
JPM	9.4%	-18.2%
BAC	11.8%	-17.7%
WFC	14.2%	-41.5%
C	16.2%	-23.7%
COF	13.4%	-21.5%
USB	12.7%	-31.2%
PNC	7.6%	-17.3%

Over the last five trading sessions, Citigroup and Wells Fargo were the major gainers, with their shares appreciating 16.2% and 14.2%, respectively. Moreover, shares of Capital One Financial COF have rallied 13.4%.

In the past six months, shares of Wells Fargo and U.S. Bancorp USB have depreciated 41.5% and 31.2%, respectively. Furthermore, shares of Citigroup have lost 23.7%.

What’s Next?

Over the next five trading days, performance of bank stocks will likely depend on the outcome of the Federal Open Market Committee (FOMC) meeting scheduled next week.

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JPMorgan Chase Co. (JPM) : Free Stock Analysis Report
 
U.S. Bancorp (USB) : Free Stock Analysis Report
 
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The Bank of New York Mellon Corporation (BK) : Free Stock Analysis Report
 
Capital One Financial Corporation (COF) : Free Stock Analysis Report
 
Wells Fargo Company (WFC) : Free Stock Analysis Report
 
Barclays PLC (BCS) : Free Stock Analysis Report
 
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