Bank shares swung widely in both direction over this week and no surprise considering the fact that they kept being ‘Greece-d’ from time to time. The week started on a bad note for banking stocks as investor expectations built up over last week from the ongoing negotiations between the Greek government and its creditors collapsed when there was no agreement reached before the EU summit. Shares of all major banks shed more than 3% of their value over trading on Monday. But by Wednesday, despair gave way to more hope, as an agreement seemed imminent with Greece sweetening the deal for private bondholders with an offer to issue gross domestic product warrants to compensate for lower interest payments. Bank shares more than made up for their loss in value in Monday over Wednesday and Thursday. Notably, there was significant events to report for U.S. Bancorp (NYSE:USB), Citigroup (NYSE:C) and Deutsche Bank (NYSE:DB).
U.S. Bancorp had a flurry of activity over the last few days, with the bank making three separate acquisition announcements. At a time when almost all major banking institutions are finding ways to cut their weight, the fifth largest U.S. bank announced that it is acquiring BankEast, First Community Bank and UMB Bank’s Indiana corporate trust business. The acquisitions of BankEast and First Community Bank are facilitated by the FDIC, as the 2 banking institutions failed last month.
You can read more about this in our article U.S. Bancorp Snaps Up Regional Banks Heading to $31.
Citigroup has decided to do away with its broker mortgage business from mid next week, as the bank intends to have better control on the quality of new mortgages it adds to its portfolio. Competitors Bank of America (NYSE:BAC) and JPMorgan Chase (NYSE:JPM) have already made similar changes to their mortgage business, as all banks tighten their operations to ease investor concerns about the quality of their loan portfolios. More information about this can be found in our article, Citi Drops Using Brokers for Mortgage Loans.
Citigroup also announced its decision to shut down one more of its proprietary trading desks late last week, as the bank prepares for the Volcker Rule due to be implemented in July. Citigroup’s Equity Principal Strategies unit will cease to exist after a week and most of the staff will leave the organization. We talk about this in the article Citi Continues Shedding Prop Trading Units as Volcker Rule Looms.
Deutsche Bank revealed its performance figures for the last quarter of 2011 on Thursday, and the worse-than-expected numbers it reported came as a shock to investors who were looking for a positive earnings surprise from the largest German bank. The bank’s numbers were kept out of the red by accounting measures that allowed it more than half a billion euros in tax benefits.  The results should make Deutsche Bank seriously reconsider its decision to exit its stable asset management business.Notes:
- Deutsche Bank reported net income of EUR 4.3 billion for the full year 2011, Deutsche Bank Press Releases, Feb 2 2012 [↩]