Bank Stock Roundup: Inflation & Policy Matters Dominate, Wells Fargo, KeyCorp In Focus

Over the last five trading days, investors’ pessimistic stance continued for the banking stocks. Release of the minutes of the Federal Reserve’s July meeting indicated a divide over the timing of interest rate hikes. The primary reason for this is the expectation of inflation staying below the Fed’s targeted level of 2% for an extended period.

While banks, at present, are reaping benefits from higher rates (easing margin pressure and increase in interest income), it now seems uncertain when the next rate hike will occur. This is perhaps one of the reasons that affected investors’ confidence in the banking stocks to some extent.

Also, disbanding of President Donald Trump’s American Manufacturing Council and the Strategy & Policy Forum indicate continued disruptions happening in the White House. Though this development is not likely to directly affect several proposed policy initiatives that are expected to strengthen the economy, investors now seem to be concerned over the timing.

Apart from these macro factors, banks continue to reel from litigation and regulatory probes. Legal headwinds pertaining to business malpractices in the pre-crisis period persist.

On the other hand, banks are intending to boost profitability through streamlining strategies. Also, with an aim to focus more on diversifying revenue base, banks are increasing market share in lucrative sectors.

(Read: KeyCorp Expands Healthcare Advisory, to Buy Cain Brothers )

Price Performance

Here is how the seven major stocks performed:

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In the last five trading sessions, Capital One and BofA and were the major losers, with their shares dropping 1% and 0.9%, respectively. Furthermore, JPMorgan moved down 0.8%.

Citigroup (NYSE:C) and JPMorgan were the best performers over the last six months with their shares increasing 11.5% and 1.6%, respectively. On the other hand, Capital One and Wells Fargo declined 9.8% and 9.6%, respectively.

What’s Next?

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

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