Bank Stock Roundup: JPM, WFC & FITB Undertake Business Restructuring Initiatives
For the past five trading days, the performance of major bank stocks has been optimistic. Overall markets remained positive for most of the trading days, mainly due to cheap updates related to coronavirus vaccines and rekindled hopes for a stimulus package.
A not-so-positive statement from Fed Chairman Jerome Powell about the “challenge” over the next few months amid the surge in infections, the slowdown in economic recovery, and hurdles related to vaccine production and mass distribution, somewhat weighed on investor sentiment .
Since banks' financials are directly related to the health of the economy, there is also a chance banks will have a tough time in the next few months.
Even so, the interest rate on the 10-year government bond rose 8 basis points (basis points) to 0.92% in the last five trading sessions. In addition, the yield on the 30-year government bond rose 10 basis points to 1.67% over the same period. Hence, a steeper yield curve is expected to benefit banks' net interest margins in a low interest rate environment.
The Federal Deposit Insurance Corporation now spoke about bank-specific developments over the past five trading days and achieved a consolidated performance for their insured commercial banks and savings banks in the third quarter of 2020. Net income of $ 51.2 billion was down 10.7% year over year. However, this reflected a significant improvement over the first half of 2020 performance as the coronavirus pandemic weighed heavily on banks' finances.
In addition, the big banks continued their business expansion efforts, with an emphasis on technology and global diversification. In addition, the banks have streamlined their operations to focus on their core business.
(Read: Bank Stock Roundup for the Week Ending October 16, 2020)
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Important developments of the week
1. Wall Street Biggie, JPMorgan JPM is increasingly focusing on advances in technology to better serve its customers. That's why the company is considering acquiring UK-based online-only bank Starling Bank Ltd. With the company planning to open a consumer bank in the UK early next year, the deal (if completed) is expected to complement its strategy.
In addition, JPMorgan's wealth management division - J.P. Morgan Asset Management - signed an agreement to acquire Boston-based fintech start-up 55ip. The start-up helps financial advisors to automate the creation of tax-efficient investment strategies. The financial terms of the deal were not disclosed.
2. Wells Fargo WFC has agreed to sell Centurion Life Insurance to Bestow, a digital life insurance platform. The terms of the contract were not disclosed until regulatory approval. Centurion, an Iowa-based life insurance company, is licensed in 47 states and the District of Columbia.
3. Fifth Third Bancorp FITB has signed an agreement to acquire Hammond Hanlon Camp LLC. The terms of the contract were not disclosed. The transaction is subject to regulatory approvals and is expected to close this month. The acquisition will support the company's efforts to further expand its presence in healthcare, which is currently one of the fastest growing segments of the economy.
4. JPMorgan plans to increase year-end pay for its market area by up to 20% after an impressive year amid the pandemic. The news was reported by Bloomberg. This is in contrast to other Wall Street companies, who most likely plan to keep the bonuses for traders unchanged year after year.
5. JPMorgan plans to double the number of private bankers in Singapore to better serve its Chinese customers. The bank intends to carry out this expansion offensive over the next two years. These details were revealed by James Wey, JPMorgan's Head of Southeast Asian Private Banking, in an interview with Bloomberg.
Value for money
This is how the seven main stocks performed:
For the past five days of trading, Capital One COF and Wells Fargo saw their maximum gains, with their stocks rising 4% and 2.5%, respectively. Citigroup C shares, however, fell 0.2% over the same period.
Over the past six months, the shares of Capital One and PNC Financial PNC are up 23.1% and 20.6%, respectively. Furthermore, the US American Bancorp USB rose 19%.
Over the next five trading sessions, major bank stocks are expected to perform in a similar fashion, provided the economic situation related to the coronavirus pandemic and updates related to vaccines do not change materially.
In addition, senior executives from several major banks will be attending Goldman Sachs' 2020 U.S. Financial Services Conference, which will be held virtually December 8-9. Therefore, there is a possibility that these banks may provide updated / additional guidance on several important matters.
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JPMorgan Chase & Co. (JPM): Free Stock Research Report
US-Bancorp (USB): Free Stock Analysis Report
Citigroup Inc. (C): Free Stock Analysis Report
Fifth Third Bancorp (FITB): Free Stock Analysis Report
Capital One Financial Corporation (COF): Report on Free Stock Analysis
The PNC Financial Services Group, Inc. (PNC): Free Stock Analysis Report
Wells Fargo & Company (WFC): Free Stock Research Report
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