Yahoo Finance Bank Stock Roundup: Wells Fargo, Citigroup in Focus for Settling Legacy Lawsuits
Over the last five trading days, banking stocks continued to trend lower. Persistent weakness in the U.S. economic data, global growth concerns and volatility in oil prices have made the operating backdrop more challenging for banks.
Further, lackluster outlook of banks for the quarters ahead and divergent monetary policies across major economies have raised concern on part of investors. Also, lower probability of any further rate hike by the Federal Reserve in 2016, owing to a soft 4Q15 GDP report, has derailed the case for a rising rate environment.
Persistent legal woes are further adding fuel to fire for banks. Though banks are restructuring their operations to augment efficiency, these measures will take time to reflect substantial financial impact.
(Read the last Bank Stock Roundup for Jan 22, 2016)
Recap of the Week’s Major Developments:
1. Per a U.S. Securities and Exchange Commission filing, Wells Fargo & Company WFC agreed to end a three-year long mortgage litigation filed by the U.S. government pertaining to the bank’s Federal Housing Administration (‘FHA’) lending program. The settlement amount is around $1.2 billion.
Giving effect to legal costs, Wells Fargo’s 2015 earnings will be reduced by $134 million, or 3 cents per share. Notably, in January, the company reported net income of $23 billion or $4.15 per share for 2015 (read more: Wells Fargo Resolves FHA Mortgage Suit; To Pay $1.2 Billion).
2. Citigroup Inc. C is set to shell out $23 million for resolving claims of conspiring to manipulate the benchmark yen Libor rate. Though the settlement papers were filed in the U.S. District Court in Manhattan, it awaits court approval.
Citigroup has also agreed to cooperate with the plaintiffs. Vincent Briganti, a lawyer for the plaintiffs, justified the early settlement with Citigroup on grounds of the bank’s "limited involvement" in the case (read more: Citigroup Settles Yen Libor Manipulation Suit for $23M).
3. Banks are revamping and modernizing their ATM networks. According to Reuters, which cited technology website TechCrunch, banking majors like Bank of America Corp. BAC and Wells Fargo are working toward integrating Apple Inc.’s AAPL Apple Pay, a mobile payment system, into their ATM network, thereby eliminating the use of plastic cards.
Apart from BofA and Wells Fargo, JPMorgan Chase & Co. JPM is also headed toward rolling out cardless ATMs in 2016. The company is working on a code-based system that will generate a temporary password to facilitate the transaction through its mobile banking application (read more: BofA, Wells Fargo & JPMorgan to Roll Out Cardless ATMs?).
Price Performance
Overall, the performance of banks remained pessimistic. Here is how the seven major stocks performed:
In the last five trading sessions, BofA and Citigroup were the major losers, with their shares plunging 6.3% and 4.2%, respectively. Moreover, Wells Fargo declined 3.2%.
Over the last six months, Citigroup was the weakest performer, with its shares declining 30.1%. Further, BofA and Capital One Financial Corp. COF slumped 25.1% and 20.9%, respectively.
What's Next in the Banking Universe?
Over the next five trading days, performance of banking stocks will likely continue in a similar manner unless there is any unexpected positive development.
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JPMORGAN CHASE (JPM): Free Stock Analysis Report
WELLS FARGO-NEW (WFC): Free Stock Analysis Report
CITIGROUP INC (C): Free Stock Analysis Report
BANK OF AMER CP (BAC): Free Stock Analysis Report
APPLE INC (AAPL): Free Stock Analysis Report
CAPITAL ONE FIN (COF): Free Stock Analysis Report
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