It’s no secret that the COVID-19 crisis and unfolding pandemic have upended both the economy and a variety of sectors. From rising unemployment and lower consumer spending to stay-at-home orders and virtual schooling, the coronavirus certainly took the world for a spin. And, as such, a variety of sectors prepared for the worst – perhaps none as bad as bank stocks.
With the potential for souring loans, lower commercial/business demand, smaller account balances/less deposits, etc., the banking industry prepared itself for an Armageddon-style scenario. The low interest rate environment – thanks to the Federal Reserve – didn’t help either. All in the all, the financial sector spent much of 2020 treading water and waiting for the flood.
But, now, that doesn’t look like it’s going to happen.
With the economy reopening, stimulus measures hitting accounts, and the number of souring loans not being nearly as bad as first expected, the bank stocks are surprisingly riding high in the new year. With their disaster preparations being able to be used as investment capital, shareholders could get the biggest rewards of all: a return to dividend growth.
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