Bank Stock Roundup: Fed Meeting Drives Optimism, JPMorgan & Wells Fargo In Focus

Over the last five trading days, performance of banking stocks was bullish. The Federal Reserve’s hawkish stance in its just-concluded September meeting was the primary reason for increased investors’ optimism for banks.

While the downsizing of balance sheet was expected, what surprised the market was the Fed signaling four more rate hikes over the next 12 months. With banks being one of the main beneficiaries of the interest rate hikes, the stocks moved higher and 10-year Treasury bond yields rose.

Moving on to bank specific news, over the last five trading sessions, three major banks announced dividend hikes (as part of their 2017 capital plan). Further, their efforts to move toward digitization to improve efficiency continued.



(Read: Bank Stock Roundup for the week ending Sep 15, 2017)

Important Developments of the Week

1. As part of their approved 2017 capital plan, three banks — JPMorgan Chase & Co (NYSE:JPM) , U.S. Bancorp (NYSE:USB) and Fifth Third Bancorp (NASDAQ:FITB) — announced dividend hikes.

JPMorgan declared a revised quarterly cash dividend of 56 cents per share, up 12% from the prior payout. The dividend will be paid on Oct 31 to shareholders on record as of Oct 6. (Read more: Is JPMorgan Stock Worth a Look Post 12% Dividend Hike?).

U.S. Bancorp announced a 7.1% hike in its quarterly common stock dividend. The new dividend of 30 cents is scheduled to be paid on Oct 16 to its shareholders on record as of Sep 29. (Read more: Will Dividend Appeal Give U.S. Bancorp Stock a Boost?).

Fifth Third raised its quarterly common stock dividend by 14.3% to 16 cents per share. The dividend will be paid on Oct 16 to shareholders on record as of Sep 29. (Read more: Fifth Third Rewards Shareholders With Dividend Hike).

2. JPMorgan has made an undisclosed investment in Bill.com, the largest business-to-business payments network in the United States. The move is part of the company’s efforts toward enabling its business clients to do away with paper checks, and instead make and receive payments electronically. Bill.com’s technology is likely to be integrated into JPMorgan’s digital system by early 2018. (Read more: JPMorgan Partners With Bill.com to Eradicate Paper Payments).

3. It seems that fake account opening scandal will continue to haunt Wells Fargo & Company (NYSE:WFC) for some more time. DBRS, a Toronto-based credit rating agency, has lowered the company’s ratings to AA (low) from AA. The downward rating reflects Wells Fargo’s operational inefficiency and improper management. The rating agency also took into account the bank’s falling reputation because of the several legal issues that have come to light of late. (Read more: Wells Fargo's Rating Lowered by DBRS on Fake-Account Scandal)

Price Performance

Here is how the seven major stocks performed:

In the last five trading sessions, Wells Fargo, The PNC Financial Services Group, Inc. (NYSE:PNC) and Citigroup Inc. (NYSE:C) were the major gainers, with their stocks rallying 4.6%, 4% and 3.9%, respectively. Furthermore, shares of both JPMorgan and U.S. Bancorp moved up 3.7%.

Citigroup and PNC Financial were the best performers over the last six months, with their shares jumping 24.5% and 13.5%, respectively. However, shares of Wells Fargo and Capital One Financial Corp. (NYSE:C) fell 1.8% and 1.5%, respectively.

What’s Next?

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

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