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Bank Stock Roundup: Restructuring, FX Manipulation, BofA & Wells Fargo Dominate

Zacks

Over the last five trading days, performance of bank stocks was bullish. The main reason for this was the post-midterm election rally as a congressional power divide lessened fears related to unexpected changes in policies that could easily hurt corporates.

Also, improving U.S. economy, low unemployment levels and the Federal Reserve’s stance for further gradual rate hike are beneficial for the bank stocks. All these continue to support the stocks’ price performance.

Further, specific bank-related developments continued to cheer investors. Notably, banks are continuing with their business restructuring initiatives, and these efforts are expected to further support revenues. Nevertheless, crisis-era legacy matters related to foreign exchange manipulation are troubling the firms.



(Read: Bank Stock Roundup for the Week Ending Oct 26, 2018)

Important Developments of the Week

1. Bank of America BAC seems to be falling behind the smaller industry players in gathering advisory fees. This probably prompted the bank to focus more on its investment banking unit. Per the Financial Times article, BofA plans to hire nearly 50 experienced deal makers as well as several mid-level staff with an aim to regain its past glory in the advisory business. (Read more: BofA Seeks to Strengthen Investment Banking Division)

2. With an aim to focus on core operations and its efforts to manage costs, Wells Fargo WFC plans to restructure its wealth and investment management segment. Per news reported by Bloomberg, the bank is contemplating the divesture of its retirement-plan services unit and expects it to generate proceeds of about $1 billion. (Read more: Wells Fargo Might Divest Retirement-Plan Services Unit)

In other development related to the same segment, Wells Fargo intends to combine its private bank and Abbot Downing, the ultra-high-net-worth unit. Notably, the combined unit will be run by a yet-to-be named new leader. Both the current units will retain their operations, but the new leader will report to Jon Weiss (the head of the wealth and investment management business) once the combined unit is created.

Shea Leordeanu, a spokeswoman for Wells Fargo, said that the bank will also create a new unit within its wealth management business for itsdirect-to-client products — Intuitive Investor and Wells Trade. Moreover, there will be a separate new unit that will take care of mergers and acquisitions as well as lending.

3. PNC Financial’s PNC board of directors announced an additional share repurchase program of up to $900 million, through the end of second-quarter 2019. This comes in addition to the $2 billion share repurchase program that was approved by the Federal Reserve as part of 2018 capital plan.

4. Amid widespread global investigation by U.S., British and Swiss regulators into the alleged foreign exchange market manipulation, 16 major global banks including BofA, JPMorgan JPM, Citigroup C and Barclays have been sued by a group of large institutional investors. Banks have been accused for rigging prices in the $5.1 trillion-a-day foreign exchange market. (Read more: Big Banks in Murky Waters, Now Accused for FX Manipulation).

Price Performance

Here is how the seven major stocks performed:

Company

Last Week


6 months

JPM

3.7%

2.5%

BAC

3.5%

-2.7%

WFC

0.0%

1.5%

C

2.8%

-3.3%

COF

4.6%

2.1%

USB

1.7%

6.5%

PNC

3.4%

-7.7%


Over the last five trading sessions, Capital One COF and JPMorgan were the major gainers, with their share price increasing 4.6% and 3.7%, respectively. Also, shares of BofA have risen3.5%.

In the past six months, shares of U.S. Bancorp USB and JPMorgan have appreciated around 6.5% and 2.5%, respectively. On the other hand, shares of PNC Financial and Citigroup have declined 7.7% and 3.3%, respectively.

What’s Next?

Over the next five trading days, performance of bank stocks will likely remain the same unless any unprecedented events occur.

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