Bank stocks took a back seat this week after rocketing higher on enthusiasm from JPMorgan’s dividend announcement and buyback plans as well as the Federal Reserve stress test results. This week we saw profit taking for most financials in fairly quiet week; however, there were some high-key events to report for BNY Mellon (NYSE:BK), Citigroup (NYSE:C) and RBS (NYSE:RBS) over the week.
Bank of New York Mellon
BNY Mellon’s battle against several states over an alleged multi-million dollar foreign exchange fraud got bigger this week. Even as it defends itself in lawsuits filed against it by the states of New York, Virginia and Florida, the world’s largest custody bank saw the state of Ohio press similar charges against it. The state of Ohio also announced its decision to sever all business ties with the bank, giving away its business to competitors Citigroup (NYSE:C) and JPMorgan Chase (NYSE:JPM).
In another setback to the bank’s reputation, the state of Massachusetts decided to put its contract with the custody bank out to a fresh bid. And as if the forex troubles were not enough, the bank also faces a steep battle against the IRS to protect a whopping $900 million in tax benefits.
You can read more about this in our article BNY Mellon’s Legal Troubles Start To Pile Up.
In a move aimed at raising some quick cash to shore up its core capital, Citigroup sold off its entire stake in Shanghai Pudong Development Bank. The global banking group’s capital structure raised serious questions when it failed the Fed’s stress test earlier this month, and the stake sale is clearly the first step towards regaining investor confidence. The bank generated $668 million from the stake sale – amounting to a post-tax gain of $349 million.
Read more about what this in our article, Citigroup Sheds Stake in Pudong Bank For $369 Million Profit.
The RBS group saw its share value swell significantly over the first two days of the week following favorable analyst opinions about the banking group. Shares of the 82% government-owned RBS were upgraded to a ‘Buy’ by UBS (NYSE:UBS) after the largest Swiss bank expressed a more optimistic outlook for U.K.’s economic growth. The brokerage firm Investec also gave RBS a similar rating hike, reinforcing UBS’s claims that RBS share prices are going north over coming months.
More information about this can be found in our article, Ratings Upgrades Give RBS Shares a Boost.