Over the last four trading days, banking stocks put up a lackluster show. Soft trading revenue outlook provided by some of the major banks hints at a bleak Q2 earnings picture. Additionally, softer loan demand is expected to add to these woes.
Further, worries surrounding Italy’s rising debt yields and consequent concerns over the Eurozone’s financial stability are dealing a blow to U.S. bank stocks. The rising political uncertainty has put pressure on the European markets and cast a pall over Euro projects as well. Therefore, increasing demand for safe assets, like the U.S. debt, has brought down the U.S. 10-year Treasury yields, triggering losses for banks in the United States.
On the other side, the Federal Reserve, along with other key financial regulatory bodies, took another step toward easing the stringent regulations related to the Volcker Rule imposed on banks post 2008 financial crisis. The three-member Federal Reserve Board unanimously approved the proposals aimed at simplifying and improving the Volcker Rule. This might help banks strengthen lending as these firms are likely to benefit from better liquidity position.
Nevertheless, coming to company-specific news, litigation and probes pertaining to the past shoddy activities dominated headlines. The law enforcement agencies are also on track, working toward resolving such issues and avoiding lengthy litigation.
(Read:Â Â Bank Stock Roundup for the Week Ending May 18, 2018)
Important Developments of the Week
1. At the 2018 Deutsche Bank Eighth Annual Global Financial Services Conference in New York, top executives of Bank of America (BAC), JPMorgan (JPM), Wells Fargo  (WFC) and Morgan Stanley (MS) hinted at the companies’ Q2 outlook.
At the conference, Brian Moynihan — chief executive officer at BofA — stated that the company’s trading income is projected to be flat year over year in the second quarter. However, Moynihan expects things to turn around, depending on the bank’s activities in June.
