Markets

Bank Stock Roundup: Fed's Policy Shift, Restructuring, JPM, WFC, C in Focus

Performance of major bank stocks over the last five trading days inspired optimism. Things have been looking up for the bond market, with Treasury yields approaching the recent high, following the announcement of a policy shift by the Federal Reserve. In a speech at Jackson Hole, chairman Jerome Powell stated that the central bank will aim for an average annual inflation of 2%.

Following this, the rate on the 10-year Treasury bond rose to 0.744%, marking the highest level since mid-June. Further, the yield on the 30-year Treasury bond climbed to 1.499%.

Nevertheless, mortgage rates continue to be at record low levels. Moreover, Fannie Mae FNMA and Freddie Mac FMCC — government-sponsored enterprises that back millions of mortgages in the United States — have announced a delay in the implementation of 0.5% refinancing fees. Now, mortgage lenders will have to pay 0.5% for every refinance loan made to consumers starting Dec 1 instead of September.

Therefore, these are expected to continue supporting origination volumes and refinancing activities. Thus, banks with mortgage banking operations will likely witness a rise in mortgage revenues.

Talking about company-specific developments, major banks continued with business restructuring initiatives. These efforts are anticipated to attract more business and fuel revenue growth. Further, with advancement in technology, increase in digital offerings by major banks was at the peak.



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

Important Developments of the Week

1. With an aim of capitalizing on acceleration of the digital banking boom owing to the coronavirus pandemic, JPMorgan JPM intends to launch an an online-only bank in the U.K. early next year. This was first reported by Sky News, citing persons familiar with the matter.

2. At a time when major U.S. banks have put the brakes on job cuts amid the coronavirus pandemic, Wells Fargo WFC is doing otherwise. Per a Bloomberg report, early this month, the bank resumed its retrenchment process under mounting pressure for cost reduction, terminating a number of positions, in view of the plan of rigorous job cuts in the coming period.

3. If JPMorgan goes ahead with the plan of owning 100% stake in its China mutual fund joint venture, China International Fund Management Co., it will have to pay a minimum of 7 billion yuan ($1 billion). Per Bloomberg, the price represents a premium of 51% over the appraised value of the stake.

4. Moving ahead with business expansion moves, Citigroup C is gearing up to offer Direct Custody & Clearing services in Finland. The latest move will make it the only global bank offering a pan-Nordic service and expanding its proprietary DCC network covering the entire Nordic region.

5. In yet another news related to JPMorgan, its enterprise blockchain platform, Quorum has been acquired by Brooklyn, N.Y.-based Ethereum-focused industry startup ConsenSys. Also, JPMorgan has made an investment in ConsenSys to support its goal of helping developers build next-generation networks and enabling enterprises to launch more powerful financial infrastructure.

Price Performance

Here is how the seven major stocks performed:
 

Company

Last Week

6 months

JPM

5.2%

-10.1%

BAC

4.3%

-7.4%

WFC

4.0%

-38.3%

C

4.9%

-16.8%

COF

9.1%

-20.5%

USB

4.9%

-18.6%

PNC

5.7%

-9.0%

Over the past five trading days, Capital One COF and PNC Financial have recorded the maximum gains, with their shares appreciating 9.1% and 5.7%, respectively. Also, shares of JPMorgan have gained 5.2% in the same period.

Over the past six months, shares of Wells Fargo, Capital One and U.S. Bancorp USB have depreciated 38.3%, 20.5% and 18.6%, respectively.

What’s Next?

Over the next five trading days, unless there is any significant change in the economic situation related to the coronavirus pandemic, the major bank stocks are likely to perform in a similar fashion.

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through Q2 2020, while the S&P 500 gained an impressive +44.0%, five of our strategies returned +50.9%, +93.8%, +122.2%, +153.0%, and even +156.8%.

This outperformance has not just been a recent phenomenon. From 2000 – Q2 2020, while the S&P averaged +5.5% per year, our top strategies averaged up to +51.7% per year.

See their latest picks free >>


Click to get this free report

JPMorgan Chase Co. (JPM): Free Stock Analysis Report

Fannie Mae (FNMA): Free Stock Analysis Report

U.S. Bancorp (USB): Free Stock Analysis Report

Citigroup Inc. (C): Free Stock Analysis Report

Capital One Financial Corporation (COF): Free Stock Analysis Report

Freddie Mac (FMCC): Free Stock Analysis Report

Wells Fargo Company (WFC): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More