June has been an eventful month for bank stocks, with three major catalysts striking the industry. But while shares of banks have fluctuated considerably through the month, they've generally trended higher. Bank of America's (NYSE:BAC) stock performance offers a case in point.
All told, shares of the nation's second biggest bank by assets are up a little over 4% since the start of the month. This is right in line with the KBW Bank Index, which tracks shares of two dozen large-cap bank stocks.
As the chart shows, Bank of America's stock hasn't consistently trended higher. It has rather alternated between rallies and declines.
The first surge came early in the month, sending Bank of America's stock up nearly 6%. It's hard to say exactly what caused this, but it seems reasonable to conclude that it was in anticipation of the Federal Reserve's decision to raise interest rates on June 14.
Bank of America has been clear in the past that it stands to make a lot more money as rates climb. When the central bank raised rates by 25 basis points in March, for instance, Bank of America said it would earn $150 million in added net interest income a quarter.
The second catalyst that occurred during the month was the release of the results from the first round of this year's stress tests, known as the Dodd-Frank Act stress tests. This happened on June 22, but investors had been anticipating it for weeks.
Bank of America passed the test with flying colors, emerging with more than enough capital to survive a hypothetical downturn akin to the financial crisis. Given this, it's a bit perplexing that Bank of America's stock, as well as shares of other large-cap banks, dropped going into the tests.
The good news is that they've since recovered some of that lost ground as investors position their bank stock holdings for the third catalyst: the results of the Comprehensive Capital Analysis and Review (CCAR), which are due out on Wednesday.
This is the second stage of the annual stress tests, one purpose of which is to give the Federal Reserve an opportunity to approve or deny bank capital plans -- i.e., how much they return to shareholders through dividends and buybacks.
Bank of America is expected to raise its dividend in the wake of this year's CCAR. Most other banks are, too. Consequently, this could explain the more recent rally that's sent shares of the Charlotte, N.C.-based bank higher in the last few days.
Looking forward, the next catalyst that bank investors will want to watch are quarterly earnings, which will be reported in the middle of July. Bank of America should continue to see its earnings improve, given higher rates and an improving regulatory environment. But investors may nevertheless want to tread cautiously in the sector, given the strong performance of bank stocks since the presidential election last November.