Global market rout that started in the last week of August continued to produce rippling effects over the last five trading days. All major benchmark indexes depicted unprecedented volatility and banking stocks did not remain unscathed.

Though headlines pertained to banks’ strategies for boosting profitability as well as regulatory and legal issues, these were largely swept away by dominant global matters. Also, improved performance of the FDIC-insured banks during the second quarter of 2015, driven by revenue growth and lower legal expenses, failed to support any improvement in the performance of banking stocks.

Banks will likely witness significant top-line growth once the interest rates start rising, which is expected to occur by the end of this month. Nonetheless, the recent market rout has triggered calls for delaying interest rate hike. Notably, the Federal Reserve’s decision about the same will be revealed at the meeting of the Federal Open Market Committee (“FOMC”) that will take place during Sep 16–17.

Till then, we believe banking stocks will continue to witness significant volatility.

(Read the last Bank Stock Roundup for Aug 28, 2015)

Recap of the Week’s Key Happenings:

1. The shareholders of Bank of America Corporation (BAC – Analyst Report) have raised a defiant demand for an independent chairman at the bank. The chairman title is currently held by the Chief Executive Officer (“CEO”) Brian Moynihan. Several institutional investors are urging shareholders to vote against the bank’s proposed bylaw change at the impending voting on Sep 22 (read more: BofA under Investor Pressure; CEO May Lose Chairman Role).

2. In furtherance of its strategy to shed international operations, Citigroup Inc. (C – Analyst Report) is reducing its footprint in Hungary. The bank has entered into a definitive agreement with Erste Bank Hungary Zrt. and its subsidiary Erste Befektetési Zrt. (Erste Investment) to vend its consumer banking business in Hungary.

Apart from streamlining its international operations, the company remains focused on businesses with favorable growth prospects. According to a Reuters report, Citigroup intends to gain from a retreat of other firms in the equities business amid new regulations and capital-intensive nature of the business (read more: Citigroup Vends Consumer Banking Business in Hungaryand Citi Treads Where Others Retreat: to Boost Equities Trade).

3. In sync with its restructuring measures announced in Jun 2015, Ohio-based Fifth Third Bancorp (FITB – Analyst Report) declared its exit from Pittsburgh retail market. The bank has agreed to sell 17 branches, retail and private banking deposits worth $383 million and consumer loans in Pittsburgh to F.N.B. Corporation.

Awaiting regulatory review and approval, the deal is anticipated to close in early 2016. However, Fifth Third will continue to provide commercial services in Pittsburgh along with wealth management, institutional services and mortgage origination activities.

4. The U.S. Department of Justice (“DOJ”) has expanded its investigation for foreign exchange (“FX”) market manipulation to include other currencies, such as Russian ruble, Argentine peso and Brazilian real. This was first reported by Bloomberg, citing persons familiar with the probe. The DOJ is using the cooperation clause, included in the agreement inked with banks in May, to extract more information (read more: Banks in Trouble: DOJ Expands FX-Market Rigging Probe).

5. Another major news that dominated the headlines was related to certain banks’ alleged discriminatory mortgage lending practices which had led several cities to sue them. In the first news, M&T Bank Corporation (MTB – Analyst Report) agreed to settle the lending discriminatory lawsuit for $485,000. The lawsuit alleged that the company had been encouraging discriminatory mortgage lending practices in New York City.

The second news was a bit disappointing for BofA, Wells Fargo & Company (WFC – Analyst Report) and Citigroup. A federal court overturned the dismissal of lending discrimination lawsuits filed by the city of Miami against these banks.

However, the third news came as a respite for JPMorgan Chase & Co. (JPM – Analyst Report) as the company won the dismissal of a similar suit filed by Los Angeles last year. Reportedly, in a recent court filing, the company’s lawyers demanded that the complaint be dropped on the ground that the bank did not foreclose any loan made to either African-American or Hispanic borrowers during the time stated in the lawsuit. Citing mixed outcomes of the legal actions and continued denial by JPMorgan, the city of Los Angeles eventually agreed to drop its claim.

(read more: M&T Bank Settles Case Over Unfair Lending Practices in NYC  and BofA, Wells Fargo, Citi Must Face Miami Lending Bias Cases).

Price Performance

The overall performance of banking stocks depicted pessimism. Here is how the seven major stocks performed: