In this series, we’ll explore the data announcements and events that may impact the performance of bank stocks during the upcoming week.
The Dow Jones Industrial Average (Dow Jones Indices:.DJI)‘s meteoric rise last week overshadowed any big news from economic announcements. But as we continue with new highs of the stock market, it will be important for more confidence boosters to come from weekly announcements. For financials investors, next week is a particularly exciting time and will determine how many banks move forward during 2013.
Let’s take a look at what’s going to be announced, what banks may be affected the most, and what you should look out for in the coming days.
NFIB Small Business Optimism Index — a monthly review of small business plans for the near term. This data is important for banks and their investors, since the expansion plans of businesses can produce higher rates of incoming business loans. The index also looks at businesses’ expectations of credit conditions, giving banks a glimpse of the attitude new business customers will have toward the banks’ products. Bank of America Corp (NYSE:BAC) has been making strong attempts at expanding its small-business lending segment, especially on its home turf in North Carolina, where it extended $230 million in loans to businesses with less than $5 million in annual revenue.
Treasury Budget — a monthly look at the state of the federal budget and the progress on deficit reduction. Mostly important because of the confidence-building possibilities an improving budget can give to investors, the budget will also show signs of movement in the bond market, which banks invest in to beef up their capital reserves.
MBA Purchase Applications— a weekly look at the mortgage application activity from the Mortgage Banker’s Association. It is important for bank investors to keep an eye on mortgage activity, since loans are a primary driver of a bank’s profitability. JPMorgan Chase & Co. (NYSE:JPM) and Wells Fargo & Co (NYSE:WFC) produced the largest percentage of mortgage originations in the third and fourth quarters of 2012, generating large portions of their revenue for 2012. With the continued pressure on net interest margins from the low rate environment, a continued decline in mortgage activity may negatively impact the nation’s banks, which continue to offset lower spreads with non-interest fees, like mortgage origination fees.