It’s been a year this week since the collapse of Silicon Valley Bank sent shockwaves through the banking sector. While the crisis most directly affected the regionals, major U.S. financial institutions for most of 2023 also found their stocks under assault. Big banks, like Club holding Wells Fargo , were largely able to turn the corner. The question is still out on the smaller lenders. On March 10, 2023, SVB abruptly shuttered and regulators seized the firm’s deposits — marking the largest U.S. banking failure since the 2008 financial crisis. The go-to bank of tech venture capitalists went from a well-capitalized institution seeking to raise some funds to closing its doors over a frantic 48-hour period . Bank stocks plummeted on contagion concerns, with shares of regional lenders getting hit the hardest. Recently, New York Community Bancorp’s financial troubles reminded the market of the risks still out there for regional banks. NYCB shares suffered a slew of bad news since the start of 2024 when management disclosed a surprise fourth-quarter loss. A leadership shakeup and Moody’s slashing the bank’s credit rating to junk status didn’t help. In a glimmer of hope, NYCB announced last week an over $1 billion capital injection from investors, led by former Treasury Secretary Steven Mnuchin’s Liberty Strategic Capital, and shares recovered a bit. The stock, however, dropped nearly 5% on Monday and remained 68% lower year to date. Unlike 2023’s SVB-induced volatility, the troubles at NYCB have not tanked the entire banking industry. The KBW Bank Index was still up 3.5% year-to-date, with many names outperforming, including Wells Fargo. WFC YTD mountain Wells Fargo (WFC) year-to-date performance While seeing a nice climb in the final months of 2023, shares of Wells Fargo have gained 15% since the start of 2024 — making the stock a top performer among major U.S. banks. Over the same stretch, the S & P 500 rose nearly 7.3%. Wells Fargo shares got a big boost after a key win with regulators in mid-February. Days later, the Club trimmed its Wells Fargo position to lock in some profits and to right-size its weighting in the portfolio, which had swelled to nearly 5%. The stock has since hit a 52-week high last Thursday. It’s only fractionally below that level on Monday. The recent leg higher started when Wells Fargo shares shot up more than 7% on Feb. 15 after the Office of the Comptroller of the Currency (OCC) lifted a big penalty related to its 2016 sales practice misconduct. Investors cheered because the regulatory news signaled that Wells Fargo could be one step closer to the Federal Reserve lifting the bank’s $1.95 trillion asset cap , which has been in place for over six years. The February OCC action was believed to be a big reason why the Fed’s balance sheet restrictions were first enforced. “That’s why I think investors really gravitated or rallied around this one getting lifted. Because even though they’ve already had a number of them lifted — and still have many more to go — this was kind of at the heart of the matter for them,” Scott Siefers, Piper Sandler senior banks analyst, told CNBC on Friday. “I think, at least psychologically, it led investors to believe ‘Okay, we’re finally getting closer to the finish line.'” Since Charlie Scharf took over as Wells Fargo CEO in 2019, the bank has cleared six of these consent orders. In a recent Club analysis , we found that these regulatory updates were overall positive for the stock over the past five years. However, a lifting of the Fed’s asset cap is the big one. It would allow Wells Fargo to finally grow its assets again and help rake in more profits. The bank would be able to write more loans, take in more customer deposits, and explore other lines of business. That’s why all strategic attempts to appease regulators are welcome news for shareholders. To be sure, though, the Club largely sees any lifting of the Fed’s asset cap as more of a 2025 story. MS YTD mountain Morgan Stanley (MS) year-to-date performance Conversely, the Club’s other bank stock, Morgan Stanley , has been lagging in 2024 — down 7% year to date. While making made a mysterious 4% push higher on March 4, the Club made a small sale the next day because no specific catalyst could be identified. Such a big move in the absence of any news tends to be unsustainable. The stock has dropped since then. Morgan Stanley’s underperformance was first spurred by a post-earnings slump in January when the firm disappointed shareholders with weak wealth management guidance. Management said at the time the bank was far from hitting management’s previously-held goal of 30% operating margins for the division. “When you get this kind of cautious commentary from a new CEO, my gut says [Ted Pick] is simply trying to lower expectations” to play the under promise, over deliver game, Jim Cramer said following the earnings release. “Plus, Morgan Stanley’s paying you to wait with that 4% yield, and they’re right in there buying with you thanks to their aggressive buyback.” The Club also still sees green shoots for the Wall Street behemoth’s long-dormant investment banking business. While IB was once a very profitable segment of Morgan Stanley, an uncertain macro environment and recession concerns have weighed on the overall deal-making environment — both in companies going public and in mergers and acquisitions activity. This month is a big one on the IPO front for Morgan Stanley, which is among the lead underwriters of the upcoming Reddit offering. It’s not only a high-profile deal with a lot of exposure for Morgan Stanley’s IB division, but the social media company is targeting a big valuation close to $6.5 billion. If the Morgan Stanley places the IPO correctly, Jim said there could be upside for the bank stock. In a Monday filing, Reddit said it aims to price shares in a range of $31 to $34 each in hopes of raising about $750 million. (Jim Cramer’s Charitable Trust is long WFC, MS. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
A combination file photo shows Wells Fargo, Citibank, Morgan Stanley, JPMorgan Chase, Bank of America and Goldman Sachs.
Reuters
It’s been a year this week since the collapse of Silicon Valley Bank sent shockwaves through the banking sector. While the crisis most directly affected the regionals, major U.S. financial institutions for most of 2023 also found their stocks under assault. Big banks, like Club holding Wells Fargo, were largely able to turn the corner. The question is still out on the smaller lenders.
Denial of responsibility! Todays Chronic is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – todayschronic.com. The content will be deleted within 24 hours.