Bank stocks took yet another roller coaster ride last week, with pronounced volatility gripping the stock market for the second time this month. Markets started off the week on a cautious note as bank share prices corrected after the boost the week before over optimism of a combined action by central banks. Towards the middle of the week, bank stocks tumbled significantly when U.S. manufacturing data showed signs of slowing down. China also reported weak manufacturing outputs – indicating that the global economic conditions will likely remain depressed for some more time to come. Bank shares, however, ended the week on a high note, jumping over trading on Friday even as Moody’s announced its long-awaited downgrade of 15 major banks. With some banks seeing smaller downgrades than initially anticipated, investors reacted positively to the news.
The U.K. government recently unveiled the strategy it intends to pursue in the near future to keep the country’s economy rolling even as the debt situation in the Eurozone continues to deteriorate. To keep lending activities going, the Bank of England will soon start injecting cheap funds into the country’s banking system. The news boosted shares for U.K.-based banks, primarily RBS and Barclays (NYSE:BCS).
Investors in RBS had another reason to cheer, as reports indicated that the British government’s support to the ICB’s recommendations for banks would mean that it will have to reduce its holdings in the 82%-state-owned bank by billions in the coming year.
You can read more about these developments in our article U.K. Govt’s Proposals Boost RBS and Barclays Shares
Deutsche Bank recently completed the first official cross-border yuan payment transaction. The transaction comes as a part of the pilot program intended to make cross-border trade in the yuan significantly quicker. With the Chinese government pushing the acceptability of the currency for international transactions, this represents a huge revenue potential for global banks. And Deutsche Bank should be able to leverage its strong grip on the foreign exchange market to gain a large share of this new market
Read more about this here: Cross-Border Yuan Payment Opportunities Support $49 Value For Deutsche Bank.
JPMorgan CEO Jamie Dimon spent a large part of the past fortnight answering questions raised by investors, regulators and politicians at various forums about its loss-making hedging bet. While the trading debacle has already strengthened Volcker Rule supporters, things look like they will continue to turn for the worse with emerging talks about a possible need to scale down the “too-big-to-manage banks.”
If these new talks gain sufficient support from the government, then it is very possible that the biggest diversified U.S. banks are made to separate their retail and investment banking businesses – similar as what is being proposed by the British government for U.K-based banks.
To know more about possible impact of JPMorgan’s trading loss on the U.S. banking sector, read JPMorgan’s Whale Losses Risk Sinking The Mega-Banks Diversified Model.