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The Zacks Analyst Blog Highlights: Wells Fargo & Company, First Data, Citigroup, Fifth Third Bancorp and SunTrust Banks

For Immediate Release

Chicago, IL – August 14, 2017 – announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Wells Fargo & Company(NYSE:WFC Free Report), First Data Corp (NYSE:FDCFree Report), Citigroup Inc. (NYSE:CFree Report), Fifth Third Bancorp (NASDAQ:FITBFree Report) and SunTrust Banks, Inc. (NYSE:STIFree Report).  

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Here are highlights from Friday’s Analyst Blog:

Bank Stock Roundup: From Earnings to Geopolitical Tensions

Over the last five trading days, major banks displayed a bearish trend. Investors’ optimism on the overall second-quarter earnings performance of the industry has been faded by concerns related to the North Korean.

The three major equity benchmarks — Dow Jones, S&P 500 and Nasdaq — recorded the worst session on Thursday since mid-May. The continuous war of words between the U.S. and North Korea has shaken investor sentiment.

Banking stocks have also been under pressure as litigations and probes grabbed headlines, particularly, Wells Fargo & Company (NYSE:WFCFree Report) leading the way. Legal headwinds pertaining to business malpractices in the pre-crisis period persist. The law-enforcement agencies are trying to resolve these issues in order to avoid lengthy litigations.

Overall, the focus has shifted from earnings to banks' strategies in boosting profitability through restructuring along with resolving legal issues, over the last five trading days.

(Read: Bank Stock Roundup for the week ending Jul 28, 2017)

Important Developments of the Week

1. Issues related to past misconducts continue for Wells Fargo. Among others, the company’s guaranteed auto protection (GAP) insurance program is currently under investigation by the Office of the Comptroller of the Currency (OCC) and the Consumer Financial Protection Bureau. In its filing, the bank disclosed that it found some issues relating to its GAP insurance product. The borrowers were not returned the amount they were entitled to. (Read more: Wells Fargo Faces Another Probe over Auto Insurance Business)

Recently, Wells Fargo announced that it entered into an agreement with the U.S. government to pay $108 million for a lawsuit settlement. Filed in 2006, the lawsuit claimed that some Veterans Administration (VA) Interest Rate Reduction Refinance Loans (IRRRLs) originated by Wells Fargo should not have been eligible for VA guarantees on account of the fees charged to the borrowers. However, the bank had denied all allegations. (Read more: Wells Fargo Settles Decade-Long Lawsuit on VA Loans)

Additionally, a federal lawsuit has been filed against Wells Fargo’s joint venture with payment processor First Data Corp (NYSE:FDCFree Report), accusing it of misleading thousands of merchants by charging them unauthorized fees. The venture, known as Wells Fargo Merchant Services, was formed to help small businesses and other merchants across the country to process their credit and debit card transactions. It had promised to provide a transparent pricing policy to the merchants.

However, per the lawsuit filed in Brooklyn, on behalf of Patti's Pitas, a now-closed restaurant in Pennsylvania, tour operator Queen City Tours in Charlotte, NC, and other merchants, the venture failed to live up to its promises. It was overbilling merchants for its services and was charging them with unanticipated fees, which they were claiming to be ‘interchange charges.’ The venture claimed that the fee was being charged by some credit card network, but actually it was them who were making profit out of the same. (Read more: Wells Fargo Hit by Lawsuit Over Unauthorized Card Fees)

2. With an aim to move past litigation issues, Citigroup Inc. (NYSE:CFree Report) has agreed to resolve a private U.S. antitrust lawsuit that accused it of rigging London Interbank Offered Rate (LIBOR). The company will be paying $130 million to settle the case, without admitting any wrongdoing. (Read more: Citigroup Resolves LIBOR Manipulation Case, To Pay $130M)

3. Fifth Third Bancorp (NASDAQ:FITBFree Report) is likely to recognize a pre-tax gain of approximately $1 billion (around $650 million after-tax) in third-quarter 2017, from the partial sale of its stake in Vantiv Inc. Notably, Fifth Third will be exercising its right to exchange 19.79 million of its Class B Units in Vantiv Holding, for 19.79 million shares of Vantiv’s Class A common stock. Further, Vantiv will buy back newly issued shares of Vantiv Class A common stock from Fifth Third at $64.04 per share. (Read more: Fifth Third to Gain $1 Billion Post Vantiv Stake Sale)

4. SunTrust Banks, Inc. (NYSE:STIFree Report) has announced a raise in its stock dividend. This follows the approval of its 2017 capital plan by the Federal Reserve in June. SunTrust declared a quarterly cash dividend of 40 cents per share, up a whopping 54% from the prior payout. The dividend will be paid on Sep 15 to shareholders on record as of Aug 31, 2017. Additionally, SunTrust’s capital plan includes authorization to repurchase $1.32 billion worth of shares, through the third quarter of 2018. (Read more: Is SunTrust Stock Worth a Look Post Dividend Hike?)

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

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SunTrust Banks, Inc. (STI): Free Stock Analysis Report
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First Data Corporation (FDC): Free Stock Analysis Report
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