The Federal Reserve Interest Rates Hike Benefits Large Cap Banking Stocks

NEW YORK, NY / ACCESSWIRE / March 22, 2017 / Bank of America and Citigroup are two major banking stocks likely positioned to take advantage of the Federal Reserve’s current and projected future interest rate hikes. With The Great Recession and corresponding bailouts far in the rear view mirror, banks are looking to increase their revenues through their credit card and loan portfolios. Other things to watch for in the banking industry is the trend to be keeping a close watch on the pay rates and bonus compensation being offered to top banking executives. The banking industry appears to have shifted to a long-term performance-based pay model, meaning CEOs and shareholders alike will have to pay close attention to future revenues.

RDI Initiates Coverage:

Bank of America Corp.

https://ub.rdinvesting.com/news/?ticker=BAC

Citigroup Inc.

https://ub.rdinvesting.com/news/?ticker=C

Bank of America went down $1.42 a share or 5.81 percent on the close of Tuesday’s trading day, declined more than the overall decline in the banking sector. It settled at $23.02, after starting the day at $24.50. Barron’s financial publication stated that large banks have an upside potential of between 7 and 10 percent in base case scenario as the Federal Reserve has begun to tighten credit availability. Though Barron’s cautions investors that they will be revising their predictions based of future market outcomes, their general prediction is that 2018 will be an even better year for the large cap banks, as the interest rate picture will become clearer and world markets will have time to make the adjustments. In related Bank of America news, bank stakeholders are becoming more aware – and disconcerted – with the pay plans and compensation of the top executive officer’s. Pay for top executives is now becoming more and more connected to the bank’s annual performance. Two financial company CEO’s have experienced the wrath of shareholders, as their annual pay for 2016 has been cut by 4 percent.

Access RDI’s Bank of America Research Report at: https://ub.rdinvesting.com/news/?ticker=BAC

At the close of Tuesday’s trading day, Citigroup closed at a price of $58.04 per share, down $1.55, as the banking sector as a whole witnessed larger decline in Tuesday’s sharp decline in the market. Looking at a larger picture, the Federal Reserve Interest rate increase and projected increases is expected to benefit large cap banks in the long run, however it is also the fact that all those stocks rallied sharply since election result. The stock started the day at $60.13 in early trading. In investor circles, there are criticisms of Michael L. Corbat, Chief Executive Officer of Citigroup, with some calling for his resignation. The price to book value of the company is 0.78, an indicator the stock is selling below its actual market value. This gives plenty of room on the upside, but the question is why the larger investment community hasn’t noticed the disparity, or there is more to this story.

Access RDI’s Citigroup Research Report at: https://ub.rdinvesting.com/news/?ticker=C

Our Actionable Research on Bank of America Corp. (NYSE: BAC) and Citigroup Inc. (NYSE: C) can be downloaded free of charge at Research Driven Investing.

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Disclaimer: This article is written by an independent contributor of RDInvesting.com and reviewed by Hemal K. Gandhi, a CFA® charter holder. RDInvesting.com is neither a registered broker dealer nor a registered investment advisor. For more information please read our full disclaimer at www.rdinvesting.com/disclaimer.

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