Following the decision of the Federal Reserve first interest rate increase from In December 2018, Federal Reserve Chairman Jerome Powell indicated that interest rates would be raised aggressively this year to control rising inflation. With inflation at its highest level in four decades, with global commodity prices surging, the Federal Reserve is expected to make two consecutive half-point increases in interest rates, one in May and one in June. . An increase in interest rates is generally beneficial to finance companies because it helps them increase their income. However, impending interest rate increases carry the risk of an economic slowdown, especially in an economy that has grown accustomed to low interest rates in recent years.

In addition, rising energy costs have investors concerned, as crude oil prices have been consistently above $100 a barrel in recent months. Historically, recessionary conditions have followed high crude prices. ING Chief International Economist James Knightley said: “As the Federal Reserve apparently feels the need to ‘catch up’ to regain control of inflation and inflation expectations, a rapid pace of aggressive rate increases The interest rate raises the chances of a policy misstep that could be enough to send the economy into a recession.”

In a recessionary environment, financial institutions may see a drop in loan demand and may need to increase their loan loss provisions. Additionally, recessions fuel other financial challenges like bankruptcies and foreclosures. Given this context, we believe it would be prudent to now avoid the shares of Wells Fargo & Company (WFC), Financial Sync (SYF) and PennyMac Mortgage Investment Trust (PAYMENT).

Wells Fargo & Company (WFC)

The WFC financial services company in San Francisco offers a diversified set of banking, commercial and consumer finance, investment and mortgage products and services. It operates through four segments: consumer lending, retail banking, corporate and investment banking, and wealth and investment management.

WFC’s total revenue decreased 5% year-over-year to $17.59 billion in the first quarter ended March 31, 2022. The company’s net income decreased 20.8% year-over-year to $3.67 billion. Also your EPS it reached $0.88, which represents a decrease of 13.7% year over year.

Analysts expect WFC’s EPS and revenue for the quarter ending June 30, 2022 to decline 31.9% and 10.8%, respectively, year over year to $0.94 million and $18.08 billion. Over the last three months, the stock has lost 17.6% to close the last trading session at $44.58.

Financial Synchronization (SYF)

SYF in Stamford, Conn., operates as a consumer financial services company in the United States. Provides credit products, private label credit cards, dual cards, co-branded and general purpose credit cards, short- and long-term installment loans, consumer banking products, and deposit products, including certificates of deposit, individual retirement accounts and money market accounts.

For its fiscal quarter ended March 31, 2022, SYF’s net interest income decreased 1% sequentially to $3.78 billion. The company’s net profit decreased 9.1% year over year to $932 million. Additionally, its net earnings attributable to common stockholders decreased 9% year over year to $922 million. Additionally, its return on assets was 4%, compared to 4.3% in the same period a year earlier.

For the quarter ending June 30, 2022, SYF’s EPS is expected to decline 32.1% year over year to $1.44. In the last six months, the share price has dropped 23.3% to close the last trading session at $37.51.

PennyMac Mortgage Investment Trust (PAYMENT)

PMT is a mortgage real estate investment trust that invests in residential mortgage loans and assets. The Moorpark, Calif., c.The company conducts all of its operations and makes investments through PennyMac Operating Partnership, LP and its subsidiaries. Its segments include credit sensitive strategies, interest rate sensitive strategies, correspondent and corporate production.

PMT’s net investment income decreased 74.8% year over year to $49.48 million for the fourth quarter ended December 31, 2021. Its net loss was $16.88 million, compared to $ 82.87 million in net income in the same period of the previous year. Additionally, its loss per share was $0.28, compared to EPS of $0.78 in the same period a year ago.

Analysts expect EPS and PMT revenue for the quarter ending March 31, 2022 to decline 53% and 59.8%, respectively, year over year to $0.32 million and $80.87 million. It failed to beat consensus EPS estimates in three of the four subsequent quarters. Over the past six months, the stock has declined 26.1% to close the last trading session at $14.89.

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Shares of WFC were up $0.08 (+0.18%) in premarket trading on Wednesday. Year-to-date, WFC is down -6.36%, versus a -11.81% rise in the benchmark S&P 500 index over the same period.

Ever since he was in elementary school, Dipanjan was interested in the stock market. This led him to earn a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a keen interest in reading and analyzing emerging trends in the financial markets. Plus…


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