When Ben Bernanke speaks, bank investors listen.
Citigroup (NYSE:C) has reached yet another 52 week high after Ben Bernanke's testimony to Congress indicated that interest rates would remain low for the foreseeable future. As a result, Citigroup is up 1.5%, and other banks are also feeling the love:
- JPMorgan Chase is leading the way, currently up 2.5%.
- Bank of America is up 0.8%.
- Wells Fargo has experienced the smallest loss, down 0.3%, but still up over 10% over the past 30 days.
- The broader KBW Bank Index (DJINDICES:^BKX) is currently trading up 0.7%.
What the Chairman's testimony means
With Bernanke indicating that raising interest rateswould have a detrimental effect on the recovery, the Fed will be keeping interest rates at their current lows. Despite unemployment being at its lowest level in four years, it is still above the level that is consistent with healthy economies. He also refused to indicate when the Fed would ease its stimulus practices, stating that it would take "real and sustainable progress" over the Fed's next few meetings.
Bright future for Citi?
After posting a 6% gain last week, Citigroup is nearly halfway there at this week's midpoint. And while its past results should not be taken as the sole indicator for its future performance, Citigroup is the best performing of the Big Four banks over the past six months, and has also drastically outperformed the S&P 500:
But this alone does not mean that the bank will continue to reach new heights. New CEO Michael Corbat is focused on cleaning up the balance sheet, a strategy that has helped competitor Bank of America. Recent changes in leadership at some divisions within Citigroup could also have long-reaching impact, with a new head of Citi Holdings looking to continue his predecessor's work of clearing some non-core assets from the bank, further streamlining its operations, and returning its focus to its core business.