Bank stocks were significantly impacted by the pandemic. There were concerns about whether borrowers will be able to repay their loans and what the overall economic scenario will look like by the time the pandemic subsides. However, things turned out rather ok for banks that made significant incomes through their trading divisions, taking advantage of higher volatility in the markets. More recently, the outlook for banks is now starting to look up. The largest bank in the US is JP Morgan Chase & Co. It also happens to be the seventh-largest bank globally. With over $3 trillion in assets, JP Morgan’s market capitalization, as of February 2021, is close to $441 billion.
Key Growth Drivers For Banks In The Near Term
Bank stocks are seeing an uptrend over the latter half of January and early February 2021. There are various factors that seem to be at play. Firstly, vaccination drives have begun in the US and all over the world. Secondly, the Federal Reserve has allowed banks to resume their share repurchases and pay out dividends. Thirdly, yields are beginning to rise again, with the 10-year treasury yield crossing 1.6% in February 2021. The yield curve is also starting to steepen, indicating that investors expect higher growth. There is also clarity on the political front as the elections are now over.
JP Morgan Chase & Co’s stock closed at $144 on 16th February 2021, trading at a reasonable dividend yield of 2.49%. The preceding one month saw the stock rise by almost 4.8%, while on a 1-year basis, the stock was up 6.6%. A peer of JP Morgan Chase & Co is Bank of America. It is also a large US-based bank. Bank of America’s stock closed at $34 on 16th February 2021. The stock was trading at a 2.1% dividend yield at the time. Over the preceding one month, the stock rose by 4.5%, while on a 1-year basis, the stock was trading flat.