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Bank Stock Roundup: Focus Shifting to Q3 Earnings, BofA & JPMorgan Dominate Headlines

With no hike in interest rates projected in the near term, banking stocks' performance depicted pessimism over the last five trading days. With third-quarter 2015 nearing the end, banks are coming out with expectations about their performances.

The unforeseen equity market turmoil in August and early September adversely impacted banks' trading revenues. Despite forming a small portion of the overall top line, slump in trading income is anticipated to produce a lasting impact on the already muted revenue growth.

Therefore, banks continue to resort to restructuring and streamlining measures to support growth. Moreover, they are not shying away from inorganic expansion as well, despite having to meet more stringent regulatory requirements.

(Read the last Bank Stock Roundup for Sep 18, 2015 )

Recap of the Week's Most Important Developments:

1. At Barclays Global Financial Services Conference in New York, JPMorgan Chase & Co. 's JPM Chief Executive Officer Jamie Dimon forecasted a decline in trading revenues for the current quarter. Though Dimon did not quantify the slump in trading revenues, he said, "about the same as everybody else" (read more: JPMorgan Sees Slump in Q3 Trading Revenue Amid Volatility ).

2. Already burdened by mounting legal woes, Wells Fargo & CompanyWFC faces yet another suit for its discriminatory lending practices. This time the company has been sued by the city of Oakland. The suit accuses the company of targeting African-American and Hispanic residents of Oakland, along with minority neighborhoods, for issuing more expensive and higher-risk loans compared with those made to white borrowers (read more: Wells Fargo Sued by City of Oakland Over Predatory Lending ).

3. In yet another major development which had been in the focus for the last couple of weeks, the calls for separating the roles of the CEO and Chairman at Bank of America Corp.BAC failed to materialize. About 63% of shareholders rejected the call to split the dual role of chairman and CEO, currently held by Brian Moynihan, at a Special General Meeting on Sep 22 (read more: BofA CEO Unscathed After Crucial Vote, to Remain Chairman ).

4. In keeping with its restructuring moves, Citigroup Inc.C is set to remodel its U.S. branches with greater focus on technology, while simultaneously reducing the number of branch locations. As per a Bloomberg report, the bank will shut down 6 retail branches in Boston and another 11 in the adjacent area in January. The bank is focused on expanding in major urban markets with increased investments and banking through digital channels on a national basis (read more: Citigroup to Shut Down 6 of its Branches in Boston ).

5. BB&T Corp.BBT is still showing interest in growing through acquisitions. As per a report from the Financial Times, the company's CEO Kelly King said that management is keen for more deals. The next acquisition may cross the $250 billion total assets threshold, with the company having to bear more complex and stringent regulations.

BB&T is ready to face tougher capital and liquidity requirements, along with closer regulatory supervision leading to additional costs, in order to remain an acquisition powerhouse. The company has completed over 80 acquisitions in the past 30 years and is expected to grow its assets at a rate of 5-10% each year.

Price Performance

The overall performance of banking stocks was somewhat subdued. Here is how the seven major stocks performed:

Company Last Week 6 months
JPM -1.2% 0.9%
BAC -0.1% 0.3%
WFC -1.0% -7.5%
C -2.3% -5.2%
COF -0.6% -7.9%
USB -1.0% -6.7%
PNC 0.4% -6.0%

In the last five trading sessions, only The PNC Financial Services Group, Inc. PNC was the only gainer, with shares increasing 0.4%. On the other hand, Citigroup and JPMorgan were the major losers with their stock price falling 2.3% and 1.2%, respectively.

Over the last six months, JPMorgan was the top performer, with its shares up nearly 1%. However, Capital One Financial Corp. COF and Wells Fargo slumped 7.9% and 7.5%, respectively.

What's Next in the Banking Universe?

The volatility in the equity market is anticipated to continue for the next couple of weeks, before the entire focus shifts to Q3 earnings results. Til then, banking stocks will likely continue to perform in a similar fashion, unless some major positive development reverses the trend.

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JPMORGAN CHASE (JPM): Free Stock Analysis Report

BB&T CORP (BBT): Free Stock Analysis Report

PNC FINL SVC CP (PNC): Free Stock Analysis Report

CAPITAL ONE FIN (COF): Free Stock Analysis Report

WELLS FARGO-NEW (WFC): Free Stock Analysis Report

CITIGROUP INC (C): Free Stock Analysis Report

BANK OF AMER CP (BAC): Free Stock Analysis Report

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


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

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