Bank Stock Roundup: Expansion Initiatives, Wells Fargo, JPMorgan, Citi In Focus

Over the last five trading days, performance of bank stocks was bullish as investors brushed aside concerns related to inversion of the yield curve, impending recession and the downward revision of fourth-quarter 2018 GDP rate.

Instead, resumption of trade talks in Beijing and banks’ efforts to improve financials through expandinginto newer avenues and upgrading digital offerings caught investors’ eyes.

With expectations of no further rate hike this year and increasing fears of economic slowdown, banks continue to diversify revenue sources and extend into new areas of operations. These strategic growth efforts are expected to support bottom-line growth, going forward.

Also, banks are taking advantage of the considerable available liquidity and relaxation of stringent banking regulations to expand through acquisitions. This will not only be accretive to earnings, but also results in cost savings.

(Read: Bank Stock Roundup for the Week Ending Mar 22, 2019)

Important Developments of the Week

1. Having faced widespread criticism for his efforts to turn around the bank, Wells Fargo’s (NYSE:C) CEO and President Timothy J. Sloan has decided to exit his role immediately. The decision has pushed the bank to start a hasty search for his successor. Sloan, who joined the company in 1987, became CEO of the San Francisco-based banking giant in October 2016. He took up the position at a time when Wells Fargo was facing its biggest regulatory threats. (Read more: Wells Fargo CEO Sloan Announces Plan to Step Down)

2. Continuing with its retrenchment efforts, Wells Fargo will now slash around 202 jobs in its consumer banking business payroll services, per a filing with the state. The latest development comes after the bank announced that will outsource its consumer banking business payroll services. (Read more: Wells Fargo to Slash 200 Jobs in Business Payroll Services)

Likewise, JPMorgan (NYSE:JPM) is set to cut hundreds of jobs in its asset and wealth management division, with most of the employees in support roles across the unit, per Bloomberg. These global reductions come after the bank’s periodic review of staffing, per a person familiar with the matter. (Read more: JPMorgan to Trim Wealth Jobs After Periodic Review of Staff)

3. In yet another development, JPMorgan plans to move roughly 300 investment banking employees from the London office to other hubs in the European Union in case of a no-deal Brexit. It asked employees working in areas such as sales and risk to sign new contracts for relocating. This news was first reported by Bloomberg. (Read more: JPMorgan to Shift 300 Employees if No-Deal Brexit Occurs)

Separately, Turkey’s banking regulator stated that it will conduct an inquiry into JPMorgan, owing to the continued decline in the value of lira. Turkey's Banking Regulation and Supervision Board alleged that the bank provided “misleading and manipulative” investment advice, which stimulated a run on the lira. (Read more: Turkey's Regulator to Probe JPMorgan Post Lira Slump).

4. In a bid to enter the booming digital payments industry, Citigroup (NYSE:C) is offering merchants a range of digital payment collection modes such as cards, e-wallets and other innovative bank transfers. The company will use Mastercard’s Payment Gateway Services, enabling institutional clients to accept global payments. (Read more: Citigroup Forays Into Digital Consumer Payments Business).

Additionally, Citigroup plans to increase the number of wealthmanagement clients in Asia Pacific this year by 10%, as escalating wealth profile in Asia provides lucrative business expansion avenues. This was reported by Reuters. The company also plans to recruit more relationship managers, along with increased usage of digital offerings, to support the expansion. (Read more: Citi Eyes Expansion in Asia, To Add Wealth-Management Clients)

5. Fifth Third Bancorp (NASDAQ:FITB) has completed the acquisition of MB Financial, Inc. with conversion of primary systems and client taking place in early May 2019. The combined entity will be the fourth largest bank in Chicago, in terms of deposits, with a 6.5% market share. (Read more: Fifth Third Closes Merger Deal With MB Financial).

Additionally, Fifth Third intends to further expand its digital capabilities, with teams that are focused on digital expected to triple in size in the near future. Per a Bizjournal report, the bank has already hired nearly 50 employees for its digital and IT teams since the beginning of the year, and plans to add roughly 200 more over the next few months. (Read more: Fifth Third to Expand Digital Capabilities With More Hiring)

Price Performance

Here is how the seven major stocks performed:

Over the last five trading sessions, PNC Financial (NYSE:C) gained 3.1%, while both Wells Fargo and Citigroup rallied 1.6%. Further, shares of both Bank of America (NYSE:C) and Capital One (NYSE:C) jumped1.2%.

In the past six months, shares of Capital Oneand Citigroup have depreciated 13.9% and 12.4%, respectively. Further, shares of JPMorgan have lost 9.4%.

What’s Next?

With first-quarter 2019 coming to an end, investors are expected to keep eyes on how banks performed during this period. Any comment from management will likely draw interest. Over the next five trading days, performance of bank stocks will likely remain somewhat lackluster unless any unexpected event occurs.

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.

This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.

See their latest picks free >>