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Bank Stock Roundup: C, TFC, JPM, USB in Focus on Business Restructuring Efforts
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Over the past five trading sessions, the performance of major bank stocks has depicted a bullish stance as various economic data including employment report and inflation indicated that economic recovery is on track. Rise in expectations that the Federal Reserve might soon reveal plans for tapering its bond buying program further boosted sentiments.
This led the rate on both 10-year and 30-year Treasury bonds to rise over the past week despite concerns over increase in cases due to Delta variant of the COVID-19 virus. The rate on the 10-year Treasury bond stands at 1.36%, while that for the 30-year Treasury bond is 2.00%.
Thus, the steepening yield curve is expected to benefit major banks’ net interest margins amid a low interest rate environment. This, in turn, will lead to top-line growth. With banks’ financials directly tied to the health of the economy, investors are now expecting improved profitability for major banks in the quarters ahead.
Now talking about bank specific developments, the key theme during the past five trading sessions was business restructuring (domestic and international). As major banks face revenue growth challenges owing to low rates and muted loan demand, they are undertaking measures to further diversify operations and fuel top-line growth through opportunistic buyouts. Divesting non-core and less-profitable businesses to focus more on core operations also remains high in the cards.
1. In continuation with its efforts to boost returns by streamlining operations internationally, Citigroup (C - Free Report) has signed a deal to sell its Australian consumer business unit to National Australia Bank, in a deal worth $882.24 million. Per the terms of the transaction, expected to close in March 2022, 800 employees of Citigroup and senior management will join National Australia Bank. The company’s institutional business and underlying technology or platforms are not part of the deal.
2. With an aim to further augment its point-of-sale lending business, Truist Financial (TFC - Free Report) has inked a deal to acquire Service Finance Company, LLC from Canada-based ECN Capital Corp. for $2 billion in cash. The company expects the deal, likely to close in the fourth quarter of 2021, to be financially attractive.
3. JPMorgan (JPM - Free Report) has received regulatory approval to obtain full ownership of its China securities joint venture. The China Securities Regulatory Commission has granted the Wall Street banking giant the permission to own a 100% stake in J.P. Morgan Securities (China) Co.
4. In efforts to scale digital capabilities for small businesses, U.S. Bancorp’s (USB - Free Report) primary subsidiary, U.S. Bank, has entered an agreement to acquire fintech company Bento Technologies. The transaction is anticipated to close in September.
Bento Technologies or Bento for Business is a payment software company, offering payment and expense-management services to small and mid-sized businesses. It enables businesses to efficiently manage card-based payments and other expenses through spend tracking, and card transaction innovative tools and controls.
Expense management tools from Bento will integrate well with the other U.S. Bank services like credit, deposit and card accounts, thereby, revamping secure payment acceptance and further advancing the digital money movement.
Hence, augmenting Bento’s accounts payable-based software with U.S. Bank’s existing Elavon and talech accounts receivable software solutions is a strategic fit. This will enable it to offer customers comprehensive payments and banking services, allowing streamlining cash flow and money management matters.
Per U.S. Bank management “our goal is to make money management easier for them so they can spend less time on administrative tasks, and more time on doing what they love – serving their customers.”
5. In a bid to remain competitive and manage the surge in the demand for global digital payments amid the pandemic, JPMorgan has launched a real-time payments option called “request for pay.” Request for pay will allow corporate clients to send payment requests to the company’s millions of retail customers, who use its app or website. The news was first reported by Reuters.
6. Citigroup has launched a digital lending platform, Bridge built by Citi, to offer wider access to capital for small and medium-sized businesses by connecting them with regional, local and community banks online for loans up to $10 million. Businesses can apply for loans through 18 banks across the Southeast and Rockies regions, including Alabama, Colorado, Georgia, Louisiana, North Carolina, South Carolina and Tennessee.
Price Performance
Here is how the seven major stocks performed:
Image Source: Zacks Investment Research
Over the past five trading days, Capital One and Bank of America recorded maximum gains, with their shares rallying 6.6% and 5%, respectively. Also, shares of Wells Fargo have gained 4.9% during the same period.
Over the past six months, shares of Wells Fargo and Capital One have surged 53.6% and 52.3%, respectively, while Bank of America have jumped 27.5%.
What’s Next?
Over the next five trading days, unless there is any major change in the economic situation, the major bank stocks are likely to perform in a similar fashion.
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Bank Stock Roundup: C, TFC, JPM, USB in Focus on Business Restructuring Efforts
Over the past five trading sessions, the performance of major bank stocks has depicted a bullish stance as various economic data including employment report and inflation indicated that economic recovery is on track. Rise in expectations that the Federal Reserve might soon reveal plans for tapering its bond buying program further boosted sentiments.
This led the rate on both 10-year and 30-year Treasury bonds to rise over the past week despite concerns over increase in cases due to Delta variant of the COVID-19 virus. The rate on the 10-year Treasury bond stands at 1.36%, while that for the 30-year Treasury bond is 2.00%.
Thus, the steepening yield curve is expected to benefit major banks’ net interest margins amid a low interest rate environment. This, in turn, will lead to top-line growth. With banks’ financials directly tied to the health of the economy, investors are now expecting improved profitability for major banks in the quarters ahead.
Now talking about bank specific developments, the key theme during the past five trading sessions was business restructuring (domestic and international). As major banks face revenue growth challenges owing to low rates and muted loan demand, they are undertaking measures to further diversify operations and fuel top-line growth through opportunistic buyouts. Divesting non-core and less-profitable businesses to focus more on core operations also remains high in the cards.
Image Source: Zacks Investment Research
(Read: Bank Stock Roundup for the Week Ending Jul 23, 2021)
Important Developments of the Week
1. In continuation with its efforts to boost returns by streamlining operations internationally, Citigroup (C - Free Report) has signed a deal to sell its Australian consumer business unit to National Australia Bank, in a deal worth $882.24 million. Per the terms of the transaction, expected to close in March 2022, 800 employees of Citigroup and senior management will join National Australia Bank. The company’s institutional business and underlying technology or platforms are not part of the deal.
2. With an aim to further augment its point-of-sale lending business, Truist Financial (TFC - Free Report) has inked a deal to acquire Service Finance Company, LLC from Canada-based ECN Capital Corp. for $2 billion in cash. The company expects the deal, likely to close in the fourth quarter of 2021, to be financially attractive.
3. JPMorgan (JPM - Free Report) has received regulatory approval to obtain full ownership of its China securities joint venture. The China Securities Regulatory Commission has granted the Wall Street banking giant the permission to own a 100% stake in J.P. Morgan Securities (China) Co.
4. In efforts to scale digital capabilities for small businesses, U.S. Bancorp’s (USB - Free Report) primary subsidiary, U.S. Bank, has entered an agreement to acquire fintech company Bento Technologies. The transaction is anticipated to close in September.
Bento Technologies or Bento for Business is a payment software company, offering payment and expense-management services to small and mid-sized businesses. It enables businesses to efficiently manage card-based payments and other expenses through spend tracking, and card transaction innovative tools and controls.
Expense management tools from Bento will integrate well with the other U.S. Bank services like credit, deposit and card accounts, thereby, revamping secure payment acceptance and further advancing the digital money movement.
Hence, augmenting Bento’s accounts payable-based software with U.S. Bank’s existing Elavon and talech accounts receivable software solutions is a strategic fit. This will enable it to offer customers comprehensive payments and banking services, allowing streamlining cash flow and money management matters.
Per U.S. Bank management “our goal is to make money management easier for them so they can spend less time on administrative tasks, and more time on doing what they love – serving their customers.”
5. In a bid to remain competitive and manage the surge in the demand for global digital payments amid the pandemic, JPMorgan has launched a real-time payments option called “request for pay.” Request for pay will allow corporate clients to send payment requests to the company’s millions of retail customers, who use its app or website. The news was first reported by Reuters.
6. Citigroup has launched a digital lending platform, Bridge built by Citi, to offer wider access to capital for small and medium-sized businesses by connecting them with regional, local and community banks online for loans up to $10 million. Businesses can apply for loans through 18 banks across the Southeast and Rockies regions, including Alabama, Colorado, Georgia, Louisiana, North Carolina, South Carolina and Tennessee.
Price Performance
Here is how the seven major stocks performed:
Image Source: Zacks Investment Research
Over the past five trading days, Capital One and Bank of America recorded maximum gains, with their shares rallying 6.6% and 5%, respectively. Also, shares of Wells Fargo have gained 4.9% during the same period.
Over the past six months, shares of Wells Fargo and Capital One have surged 53.6% and 52.3%, respectively, while Bank of America have jumped 27.5%.
What’s Next?
Over the next five trading days, unless there is any major change in the economic situation, the major bank stocks are likely to perform in a similar fashion.