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Bank Stock Roundup: Concerns Rife, Fed Rate Hike, Citigroup & Wells Fargo in Focus
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Over the last five trading days, performance of bank stocks was bearish as a number of issues, including fears of domestic and global economic slowdown, shook the markets. These resulted in negative investor sentiments, leading to a slide in banking stocks.
Further, major banks’ performance was dismal despite the Federal Reserve increasing the interest rates for the fourth time this year which now stands at 2.25-2.50%. While higher interest rates benefit banks, the Fed signaled one less rate hike for 2019 than what it had projected in September. Now, the central bank expects two rate hikes in 2019, one in 2020 and no rate hike in 2021.
The Fed statement said, “The Committee judges that some further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective over the medium term.”
Nevertheless, banks continued with their restructuring and streamlining initiatives. In addition, resolution of probes and lawsuits related to legacy matters continued.
1. Citigroup (C - Free Report) will likely reshuffle its prime brokerage business following anticipated losses of $180 million on loans provided to an Asian hedge fund. Some foreign-exchange trades are expected to be on the downside leading to losses. Notably, discussions are ongoing between the hedge fund and Citigroup to minimize the eventual losses after squaring off the positions in a sound way. (Read more: Citi Might Record $180M Loss, Reshuffles Prime Brokerage Unit)
2. Wells Fargo & Company (WFC - Free Report) has finally attained the customary final court approval for settlement of the fake accounts scandal related to class action lawsuit that was filed against the company by its shareholders in September 2016. The settlement amount of $480 million was approved by both the parties in May 2018. Also, shareholders who bought Wells Fargo’s common stock in the period between Feb 26, 2014, and Sep 20, 2016, will be eligible to claim the refund. Notably, the San Francisco-based bank had fully reserved the amount, as of Mar 31, 2018. (Read more: Wells Fargo Gets Judge's Nod for $480M Sales Scam Settlement)
3. BB&T Corporation and its bank subsidiary’s ratings have been affirmed by Moody's Investors Service, a rating arm of Moody's Corporation (MCO). Moody's affirmed the company’s standalone baseline credit assessment (BCA) at a1, while its senior unsecured and subordinated debt ratings stand at A2. Additionally, BB&T's rating outlook remains stable. (Read more: BB&T's Ratings Affirmed by Moody's, Outlook Stable)
4. Fifth Third Bancorp (FITB - Free Report) has raised its quarterly common stock dividend by about 22% to 22 cents per share. The dividend will be paid on Jan 15, 2019, to shareholders of record as of Dec 31, 2018. Fifth Third’s robust business model reflects the company’s commitment toward returning value to shareholders with its strong cash-generation capabilities. (Read more: Fifth Third Announces 22% Dividend Hike: Worth a Look?)
5. Ratings of Regions Financial Corporation (RF - Free Report) and its bank subsidiary, Regions Bank, were confirmed by Moody’s Investors Service. Moreover, the outlook has been upgraded from stable to positive. Additionally, Moody’s affirmed the Bank's baa1 standalone baseline credit assessment (BCA) and A2/Prime-1 for deposits ratings for Regions Bank. Also, Regions has a senior unsecured rating of Baa2. The ratings agency is of opinion that the company will be able to maintain a strong balance sheet position, with enough liquidity to continue engaging in operations. Furthermore, the company’s diversified loan portfolio, safe risk-taking approach, along with favorable U.S. economy, has helped improve its asset risk.
Price Performance
Here is how the seven major stocks performed:
Company
Last Week
6 months
JPM
-3.8%
-9.2%
BAC
-1.5%
-16.7%
WFC
-1.1%
-14.2%
C
-5.0%
-21.4%
COF
-5.4%
-21.5%
USB
-6.1%
-9.6%
PNC
-4.2%
-18.5%
Over the last five trading sessions, U.S. Bancorp (USB - Free Report) and Capital One Financial (COF - Free Report) were the major losers, with their shares decreasing 6.1% and 5.4%, respectively. Moreover, shares of Citigroup have declined 5%.
In the past six months, shares of Capital One Financial and Citigroup have depreciated around 21.5% and 21.4%, respectively. Further, shares of PNC Financial (PNC - Free Report) have lost 18.5%.
What’s Next?
Over the next five trading days, performance of bank stocks will likely remain the same unless any unexpected event occurs.
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Image: Bigstock
Bank Stock Roundup: Concerns Rife, Fed Rate Hike, Citigroup & Wells Fargo in Focus
Over the last five trading days, performance of bank stocks was bearish as a number of issues, including fears of domestic and global economic slowdown, shook the markets. These resulted in negative investor sentiments, leading to a slide in banking stocks.
Further, major banks’ performance was dismal despite the Federal Reserve increasing the interest rates for the fourth time this year which now stands at 2.25-2.50%. While higher interest rates benefit banks, the Fed signaled one less rate hike for 2019 than what it had projected in September. Now, the central bank expects two rate hikes in 2019, one in 2020 and no rate hike in 2021.
The Fed statement said, “The Committee judges that some further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective over the medium term.”
Nevertheless, banks continued with their restructuring and streamlining initiatives. In addition, resolution of probes and lawsuits related to legacy matters continued.
(Read: Bank Stock Roundup for the Week Ending Dec 7, 2018)
Important Developments of the Week
1. Citigroup (C - Free Report) will likely reshuffle its prime brokerage business following anticipated losses of $180 million on loans provided to an Asian hedge fund. Some foreign-exchange trades are expected to be on the downside leading to losses. Notably, discussions are ongoing between the hedge fund and Citigroup to minimize the eventual losses after squaring off the positions in a sound way. (Read more: Citi Might Record $180M Loss, Reshuffles Prime Brokerage Unit)
2. Wells Fargo & Company (WFC - Free Report) has finally attained the customary final court approval for settlement of the fake accounts scandal related to class action lawsuit that was filed against the company by its shareholders in September 2016. The settlement amount of $480 million was approved by both the parties in May 2018. Also, shareholders who bought Wells Fargo’s common stock in the period between Feb 26, 2014, and Sep 20, 2016, will be eligible to claim the refund. Notably, the San Francisco-based bank had fully reserved the amount, as of Mar 31, 2018. (Read more: Wells Fargo Gets Judge's Nod for $480M Sales Scam Settlement)
3. BB&T Corporation and its bank subsidiary’s ratings have been affirmed by Moody's Investors Service, a rating arm of Moody's Corporation (MCO). Moody's affirmed the company’s standalone baseline credit assessment (BCA) at a1, while its senior unsecured and subordinated debt ratings stand at A2. Additionally, BB&T's rating outlook remains stable. (Read more: BB&T's Ratings Affirmed by Moody's, Outlook Stable)
4. Fifth Third Bancorp (FITB - Free Report) has raised its quarterly common stock dividend by about 22% to 22 cents per share. The dividend will be paid on Jan 15, 2019, to shareholders of record as of Dec 31, 2018. Fifth Third’s robust business model reflects the company’s commitment toward returning value to shareholders with its strong cash-generation capabilities. (Read more: Fifth Third Announces 22% Dividend Hike: Worth a Look?)
5. Ratings of Regions Financial Corporation (RF - Free Report) and its bank subsidiary, Regions Bank, were confirmed by Moody’s Investors Service. Moreover, the outlook has been upgraded from stable to positive. Additionally, Moody’s affirmed the Bank's baa1 standalone baseline credit assessment (BCA) and A2/Prime-1 for deposits ratings for Regions Bank. Also, Regions has a senior unsecured rating of Baa2. The ratings agency is of opinion that the company will be able to maintain a strong balance sheet position, with enough liquidity to continue engaging in operations. Furthermore, the company’s diversified loan portfolio, safe risk-taking approach, along with favorable U.S. economy, has helped improve its asset risk.
Price Performance
Here is how the seven major stocks performed:
Company
Last Week
6 months
JPM
-3.8%
-9.2%
BAC
-1.5%
-16.7%
WFC
-1.1%
-14.2%
C
-5.0%
-21.4%
COF
-5.4%
-21.5%
USB
-6.1%
-9.6%
PNC
-4.2%
-18.5%
Over the last five trading sessions, U.S. Bancorp (USB - Free Report) and Capital One Financial (COF - Free Report) were the major losers, with their shares decreasing 6.1% and 5.4%, respectively. Moreover, shares of Citigroup have declined 5%.
In the past six months, shares of Capital One Financial and Citigroup have depreciated around 21.5% and 21.4%, respectively. Further, shares of PNC Financial (PNC - Free Report) have lost 18.5%.
What’s Next?
Over the next five trading days, performance of bank stocks will likely remain the same unless any unexpected event occurs.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>