Performance of major bank stocks over the last five trading days suggests a bleak picture. The Coronavirus outbreak, which originated in China, has sent jitters across global markets, including the United States. Concerns over the crippling COVID-19 impact on the U.S. economy are keeping investors on their toes. Consequently, the yield on benchmark 10-year Treasury note plummeted sharply.
Specifically, the rate on the 10-year Treasury bond has slid below 1.3%, for the first time in history. Further, the yield on the 30-year Treasury bond shrunk to a record low of 1.782%. In addition, mortgage rates decreased to the lowest level since October 2016 on investors’ fears over Coronavirus threats. Therefore, they have now moved toward safe-haven assets, sinking the benchmark 10-year Treasury yield, in turn, pushing bond prices higher.
Anticipations of another Fed rate cut this year, in a bid to help the economy, have been making rounds in the market. Thus, banks’ margins are likely to be impacted.
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 along with solid capital-deployment activities.
(Read: Bank Stock Roundup for the Week Ending Feb 14, 2020)
Important Developments of the Week
1. Wells Fargo WFC has entered into a deal with the U.S. Department of Justice and the Securities and Exchange Commission (“SEC”), in order to settle a fake account openings scandal that has proved to be a major setback for the company. The bank has admitted to have wrongly collected millions of dollars in fees and interests from customers. It also agreed to have the credit ratings of certain customers and unlawfully misused customers’ sensitive personal information, including their means of identification. (Read more: Wells Fargo Fined $3B by Regulators to Settle Sales Scandal)
2. JPMorgan JPM moves on with expansion in digital mode. With focus on digitization, the bank is planning to start offering digital consumer banking services in the U.K. by this year end. The bank intends to provide savings and current accounts, along with a wide range of banking services and loan products under its Chase brand. Nonetheless, it is unclear whether or not the company will provide mortgage loans. (Read more: JPMorgan Mulls Launch of Online Consumer Bank in the UK)
Separately, with China opening up its financial markets faster than expected, the biggest U.S. bank (in terms of total assets) JPMorgan now intends to get approval for full ownership of all its mainland China operations by next year. This was stated by Mark Leung, the CEO of its China businesses, in an interview with the South China Morning Post in Hong Kong. This is part of JPMorgan’s a four-year investment plan in China, which was announced last year. Also, the bank will be celebrating 100 years of China operations in 2021. (Read more: JPMorgan Targets Full Ownership in China Businesses by 2021)
3. Fifth Third Bancorp FITB has raised its quarterly common stock dividend by 12.5% to 27 cents per share. The dividend will be paid on Apr 14, to shareholders of record as of Mar 31, 2020. 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 Rewards Investors With 12.5% Dividend Hike)
4. With an increased focus on digitization, Capital One COF is planning to shut down around 37 branches nationwide. The company has filed applications for the same with the Office of the Comptroller of the Currency. Capital One spokesman Derek Conrad in a statement said, “Our customers are increasingly engaging with us digitally. We continue to see steady growth in mobile banking, online banking, enhanced ATMs, remote deposit capture, etc., however, we know that many customers still value some physical presence to provide assurance, advice, and the ability to facilitate and support some transactions. We do too. Our goal is to deliver a compelling and optimal customer experience across all channels, not just one.”
5. Regions Financial’s RF subsidiary, Regions Bank has agreed to acquire equipment finance lender, Ascentium Capital LLC, from Warburg Pincus. Closing of the deal, expected in second-quarter 2020, is subject to satisfaction of customary closing conditions.
While the financial terms of the transaction remain undisclosed, the acquisition of Ascentium Capital is expected to boost Regions Financial’s offerings for small-business customers. It also complements the bank’s established equipment finance and commercial banking businesses that serve middle-market and large companies.
Here is how the seven major stocks performed:
Over the last five trading sessions, Citigroup C and Bank of America BAC were the major losers, with their shares depreciating 15.7% and 15.2%, respectively. Moreover, shares of PNC Financial PNC fell 15.1%.
In the past six months, shares of JPMorgan and BofA have appreciated 16.4% and 11.4%, respectively. Furthermore, shares of Capital One Financial have gained 8.2%.
Over the next five trading days, performance of bank stocks will likely remain the same unless any unexpected event occurs.
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