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Bank Stock Roundup: Wells Fargo Restructures Business, OZRK Q2 Earnings In Line

Over the last five trading days, major banks displayed a bearish trend. The earnings season has kick started and this time, banks are expected to be hurt by a tough operating backdrop. This seems to be one of the primary reasons for investors’ pessimistic stance.

A number of factors including weak trading and investment banking activities, lower-than-expected interest rates and lesser demand for refinancing activities during the quarter must be weighing on investors’ mind. All these are expected to hurt banks’ revenue growth to some extent. With expense reduction not likely to be a major support, there is less chance of impressive growth in the banks’ bottom line.

Nonetheless, the last five trading sessions witnessed streamlining efforts. Banks are continuing with such initiatives with an aim to focus on core operations and enhance profitability, going forward.



(Read: Bank Stock Roundup for the week ending Jul 7, 2017)

Important Developments of the Week

1. Wells Fargo & Company WFC has inked a deal to divest its Shareowner Services business to U.K.-based Equiniti Group plc for $227 million. The deal, still subject to regulatory and Equiniti shareholder approvals, is likely to close by the end of first-quarter 2018.

The business being sold offers shareowner services across the country, including stock transfer agent, corporate action and investment plan services. As part of the deal, over 400 team members of the unit will become the part of Equiniti.

Ed Blakey, head of Wells Fargo Commercial Capital said, “We believe this sale will also allow us to continue to sharpen our focus on areas of our business that are essential for growth.”

2. Wells Fargo is cutting back its auto lending business. The company is taking this step as a prolonged low interest rate environment has taken toll on the U.S. auto market, per an article by Reuters. (Read more: Wells Fargo Reduces Exposure to Auto Loan Portfolio)

3. Wells Fargo has received preliminary approval from the U.S. District Court for the Northern District of California for the settlement of a class-action lawsuit for $142 million. The is related to the bank’s practices of opening more than 2 million credit and deposit accounts for its customers without their permission since 2009. (Read more: Wells Fargo Gets Preliminary Nod for $142M Settlement)

4. Bank of the Ozarks, Inc.’s OZRK second-quarter 2017 earnings of 73 cents per share were in line with the Zacks Consensus Estimate. A rise in net interest income and fee income acted as tailwinds. However, the company witnessed a significant jump in expenses during the quarter, along with higher provision for loan and lease losses. (Read more: Bank of the Ozarks Q2 Earnings In Line, Revenues Rise)

Price Performance

Here is how the seven major stocks performed:
 

Company

Last Week

6 months

JPM

-0.8%

8.6%

BAC

-0.8%

7.7%

WFC

-0.3%

1.9%

C

-1.3%

13.0%

COF

0.1%

-6.2%

USB

-0.5%

2.1%

PNC

1.2%

8.3%


In the last five trading days, The PNC Financial Services Group, Inc. PNC was up 1.2%. On the other hand, shares of Citigroup Inc. C fell 1.3%, while both JPMorgan Chase & Co. JPM and Bank of America Corp BAC declined 0.8%.

Citigroup and JPMorgan were the best performers over the last six months, with their shares jumping 13% and 8.6%, respectively. However, Capital One Financial Corporation’s COF shares declined 6.2%.

What’s Next?

Over the next five trading sessions, investors’ sole focus will be on banks’ performance in the second quarter. BofA and Comerica Incorporated CMA are scheduled to release results on Jul 18, while U.S. Bancorp USB will report on Jul 19. Further, BB&T Corporation BBT, KeyCorp KEY and The Bank of New York Mellon Corporation BK will report earnings on Jul 20.

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J P Morgan Chase & Co (JPM): Free Stock Analysis Report
 
BB&T Corporation (BBT): Free Stock Analysis Report
 
PNC Financial Services Group, Inc. (The) (PNC): Free Stock Analysis Report
 
Comerica Incorporated (CMA): Free Stock Analysis Report
 
U.S. Bancorp (USB): Free Stock Analysis Report
 
KeyCorp (KEY): Free Stock Analysis Report
 
Bank Of New York Mellon Corporation (The) (BK): Free Stock Analysis Report
 
Wells Fargo & Company (WFC): Free Stock Analysis Report
 
Citigroup Inc. (C): Free Stock Analysis Report
 
Bank of America Corporation (BAC): Free Stock Analysis Report
 
Bank of the Ozarks (OZRK): Free Stock Analysis Report
 
Capital One Financial Corporation (COF): Free Stock Analysis Report
 
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