Banking News 2015
The common knowledge for many investors is that bank stocks perform very well when central banks increase sovereign interest rates. However, as the year showed, bank stocks only appreciate if interest rates are hiked and the economy itself is improving overall. But it is a matter of opinion whether the global economy is on the up or not.
Many analysts state that we are in stuck in a circle. But what the pundits are missing is that the present bubble is about that banks are over-leveraged. Prolonged period of record-low interest rates allowed companies to take on unbelievable amounts of debt to fuel growth, and many are struggling already. And when interest rates increase, servicing debt becomes near-impossible. If we touch upon the growth aspect, not many industries have grown on a proper level. There is a lack of growth in wages and consumers are hesitant to spend.
The primary reason it is so complicated for the banking industry is that not many of us have lived through a deflationary period. And deflation is never a positive thing for financial stocks. Investing in the best financial companies in small amounts can be rewarding over the long time-frame, especially if you reinvest dividends.
Banking News 2015: a list of top-performing banking sector companies of 2015.
Bank of America Corp. has been a battle ground for investors. The year was full of extreme highs and lows. It has troubles with unsellable foreclosures. On the other hand Bank of America offers a decent yield of 1.20%.
Goldman Sachs Group, Inc. has plenty of of leverage. This is the primary reason it made into this list. There is a reason it managed to survive the previous crisis. Goldman Sachs has a yield of 1.30% that is better than an industry average.
But in 2015 the majority of largest banks were unable to return capital it lent to companies and individuals. The questions have been circling around J.P. Morgan at the end of the year when the bank outperformed first quarter earnings. It seemed that the bank found a way to silence its critics. But in spite of a strong first quarter, J.P. Morgan’s stock closed with losses in 2015.
With the way the financial stocks seem to be falling or staying nearly flat, it is likely that big bank CEOs will have to answer hard questions pretty soon.
Across Atlantic, the Deutsche Bank ranks number 1 in being able to withstand economic malaise. And it yields 3.00%, which is was intriguing opportunity for 2015.
And the bottom line is that you should not be fooled into thinking that hiked interest rates will reverse banking sector's fortunes and will guarantee stock appreciation. We are currently treading dangerous waters. Owing to chronically poor interest rates and deflation many banks struggled to perform well. Nonetheless, bank stocks improved on average 0.25%. That said, the above-mentioned names were the strongest performing banks in 2015 and the ones you should watch with a view for possible investment.