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Bank Stock Roundup: Trump’s Policy Uncertainty Hits Headlines, Wells Fargo in Focus

Zacks

Over the last five trading days, performance of banking stocks has been bearish. The news from Washington about Donald Trump interfering with a federal probe, along with calls for independent investigation related to probable collusion between his election campaign and Russia, has shaken investors. Further, concerns increased on the uncertainty related to the promised policy change associated with tax and banking sector reforms, along with infrastructure spending, moving forward on the administration agenda.

Mortgage rates declined this week, hitting 4.02%, along with bond yields on weak domestic economic data. Further, the benchmark 10-year Treasury yield declined to 2.18%, depicting a one-month low figure, as demand for safe-haven assets increased due to the ongoing political concerns.

Nevertheless, strategies to enhance profitability through streamlining operations, and resolution of litigations and probes related to legacy matters and business misconducts persisted in the last five trading days.



(Read: Bank Stock Roundup for the week ending Apr 28, 2017)

Important Developments of the Week

1. As part of its efforts to move jobs out of London post-Brexit, JPMorgan Chase & Co. JPM is buying an office space in Dublin. This move confirms confidence in the Irish capital at a time when various cities of the European Union are competing to convince financial institutions with large bases in the UK to choose them over others to carry out activities previously performed in London. Carin Bryans, senior country officer for JPMorgan in Ireland, said in a statement, “Given the momentum of our local businesses, this new building gives us room to grow and some flexibility within the European Union.” He added, “Dublin has the vibrant business and technology communities that suit a global firm like ours.” (Read more: JPMorgan Buys Dublin Office to Move Jobs Post Brexit)

2. In a federal lawsuit filed against Wells Fargo & Company WFC, the City of Philadelphia claimed that the bank was engaged in discriminatory lending practices. The city argues that the bank purposely provided the minorities with riskier loans carrying high interest rates, even though they were eligible for cheaper loans. In an analysis conducted on the bank, it was revealed that about 23% of loans given to the African-American and Latino borrowers were risky and costly, while for the whites it represented only 7.6%.The complaint also says that the officials of the bank were aware of such practices.

It was noted that the U.S. Department of Justice and some of the other cities such as Los Angeles, Oakland, Miami, Baltimore, Memphis and Miami Gardens filed similar lawsuits against Wells Fargo. (Read more: Wells Fargo Hit with Lawsuit on Discriminatory Charges)

3. Reflecting steady capital deployment activities, KeyCorp KEY announced a rise in its quarterly cash dividend. This was part of its capital plan approved by the Federal Reserve in Jun 2016. KeyCorp declared a quarterly cash dividend of 9.5 cents per share, up 11.8% from the prior payout. The dividend will be paid on Jun 15 to shareholders on record as of May 30. Additionally, KeyCorp has a share repurchase program in place of up to $350 million. (Read more: KeyCorp Hikes Dividend by 11.8%: Time to Own the Stock?)

Price Performance

Here is how the seven major stocks performed:

Company

Last Week


6 months

JPM

-3.4%

8.0%

BAC

-5.3%

13.7%

WFC

-1.2%

-0.8%

C

-1.6%

8.3%

COF

-0.2%

-3.3%

USB

-1.3%

3.1%

PNC

-2.9%

5.5%


In the last five trading sessions, Bank of America Corp. BAC and JPMorgan were the major losers, with their shares declining 5.3% and 3.4%, respectively. Moreover, The PNC Financial Services Group, Inc. PNC descended 2.9%.

BofA and Citigroup Inc. C were the best performers over the last six months, with their shares surging a whopping 13.7% and 8.3%, respectively. In addition, JPMorgan’s shares jumped 8.0%.

What’s Next?

In the coming five days, price performance of bank stocks is likely to follow similar trend, unless there is any unprecedented event.

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