In the past five trading days, major banks were in focus on the expectations of the Federal Reserve turning more hawkish. In company-specific developments, Citigroup C was in the limelight for pausing its share repurchases in the current quarter. Also, the bank is expanding its cash management solution across 14 additional European countries and has applied for a license to re-enter China's investment banking (IB) space. These initiatives are likely to support its fee income growth.
Additionally, JPMorgan JPM announced new tools for its customers to avoid overdraft service fees, effective January 2022. Further, U.S. Bancorp USB, through its subsidiary U.S. Bank, completed the deal to acquire PFM Asset Management LLC.
(See the last bank stock roundup here: Bank Stock Roundup for the Week Ending Oct 22, 2021)
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Re-cap of the Week’s Important Developments
1. Citigroup’s chief financial officer Mark Mason in an investor conference said that the company is pausing share repurchases for the fourth quarter. The decision has been made in anticipation of the impact of the new capital rule — Standardized Approach for Counterparty Credit Risk (SACCR) — related to derivatives risks.
Other than this, management noted that the current quarter consumer revenues are likely to pick up momentum sequentially but be down in the mid-single digits on a year-over-year basis.
2. In other developments, Citigroup is taking initiatives to further expand its fee income sources. The company, which had exited China securities joint venture in 2018, now plans toform a fully owned IB in the country. It has submitted the application for a license to the China Securities Regulatory Commission.
Further, Citigroup has expanded its cash management solution across 14 new European markets to benefit from the wave of digital transformation in the treasury and foreign exchange risk management of corporate clients.
At a recent conference, Citigroup had underlined its capital allocation strategy to invest in businesses like treasury and trade solutions, commercial banking and security services, which generate returns higher than the company’s cost of capital. So, the expansion of the cash management solution will likely result in higher client onboarding and drive revenue growth in the upcoming period.
3. Following the success of “new enhancements to checking accounts” (announced this August), JPMorgan has now come up with a few more features. Beginning 2022, the bank will offer more ways for Chase customers to avoid overdraft service fees The company noted that the new tools are part of its efforts over the past decade.
4. U.S. Bancorp’s primary subsidiary U.S. Bank concluded the deal, announced this July, to acquire PFM Asset Management LLC. PFM Asset Management will operate as a separately registered investment advisor. Following the addition of PFM Asset Management, U.S. Bank’s Wealth Management and Investment Services division has combined investment assets under management of more than $407 billion as of Sep 30, 2021.
Price Performance
Here is how the seven major stocks performed:
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Over the past five trading sessions, shares of Capital One gained 5.1%. On the other hand, shares of both Citigroup have declined 1% during the same period.
What’s Next in the Banking Space?
Over the next five trading days, all eyes will be on the Fed as the two-day FOMC meeting is scheduled on Dec 14-15.
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