While penny stocks and top financial institutions might not seem to go hand-in-hand, the current stock market environment has left nothing to chance. In fact, if you’ve been following the banking crisis since Silicon Valley Bank failed, you know what I’m talking about.
Bank runs in 2023 have caused a storm of confusion and concern, and the latest bank failure adds more fuel to the fire. First Republic (NYSE: FRC) is the latest American bank to fail, marking the third since March. JPMorgan Chase (NYSE: JPM), the largest U.S. bank by most measures, was waiting with open arms to take control.
The FDIC’s Deposit Insurance Fund will take a $13 billion hit. When it came to Silicon Valley Bank, that cost was much higher at roughly $20 billion. It also explained, “The FDIC as receiver and JPMorgan Chase Bank, National Association, will share in the losses and potential recoveries on the loans covered by the loss–share agreement.”
JPMorgan, First Republic Takeover
Following a drawn-out bidding process over the weekend, JPMorgan won the bid and will get all of Frist Republic’s deposits and a “substantial majority of assets,” according to JPMorgan.
“Our government invited us and others to step up, and we did,” said Jamie Dimon, Chairman and CEO of JPMorgan Chase. “Our financial strength, capabilities, and business model allowed us to develop a bid to execute the transaction in a way to minimize costs to the Deposit Insurance Fund.”
Here’s how the transaction breaks down according to the bank:
- Acquisition of the substantial majority of First Republic Bank’s assets, including approximately $173 billion of loans and roughly $30 billion of securities
- Assumption of approximately $92 billion of deposits, including $30 billion of large bank deposits, which will be repaid post-close or eliminated in consolidation
- FDIC will provide loss share agreements covering acquired single-family residential mortgage loans and commercial loans, as well as $50 billion of five-year, fixed-rate term financing
- JPMorgan Chase is not assuming First Republic’s corporate debt or preferred stock
JPMorgan will recognize an upfront, one-time, post-tax gain of roughly $2.6 billion. This doesn’t demonstrate the approximately $2 billion of post-tax restructuring costs expected. JPMorgan also anticipates remaining “very well-capitalized” and maintaining “healthy liquidity buffers.”
Penny Stocks To Watch
This banking crisis comes just a few days before the Federal Reserve’s May meeting and rate hike decision. Hopes for a soft landing have waivered in light of recent events. Furthermore, JPMorgan CEO Dimon also thinks there will be other cracks in the system with a recession and higher rates.
Nevertheless, the FRC stock disaster has placed a focus on financial stocks, including penny stocks. This article looks at a handful trading higher in the stock market today, even amid the recent market turmoil.
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MMTEC Inc. (MTC)
A portion of the market that has gained attention recently is the “stocks under $1” niche. Thanks to the significant sell-off in the stock market over the last year, there’s a wide moat of cheap stocks to choose from. MMTEC is one of the companies exposed to several driving, sentiment-based forces in the stock market today. Not only does it trade under $1, but it’s also a China-based stock.
The company focuses on investment banking and asset management. It also provides traditional incubation and investment in both domestic and foreign companies listed in the US. MTEC saw its shares surge due to bullish sympathy sentiment for Chinese financial stocks. In addition, MTC stock could also fall into the “low-float” arena as most outlets show it having a public float below 5 million shares. Needless to say, it is worth mentioning that speculation is helping to drive attention to stocks like this.
Huize Holding Limited (HUIZ)
Financial stocks also include insurance stocks, and Huize Holding Limited has gained attention in the stock market today. The company offers a digital insurance platform in China and recently posted its full-year performance results for 2022.
Huize said, “Renewal premiums facilitated on our platform in the fourth quarter of 2022 increased by 80.8% to RMB1,032.5 million from RMB571.0 million in the fourth quarter of 2021, primarily driven by high persistency metrics of our high-quality and loyal long-term insurance products customer base.”
The company also gave guidance for 2023. This included a non-GAAP net profit attributable to shareholders of “not less than RMB30 million in 2023. Last week, Huize officially filed its annual report on Form 20-F for investors to compare notes.
X Financial (XYF)
Shares of financial stocks tied to China have taken off in the stock market today. You’ll also see this reflected in this list of penny stocks. X Financial is an online personal finance company in China that saw its stock price surge on Monday. Shares jumped to highs of $12.36 during early morning trading, with an aggressive pullback bringing prices back below the $5 level before the stock market opened.
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Upbeat sentiment from last week’s run in TOP stock may have overflowed into XYF stock and others this week. If you were watching, shares of Top Finacial (another China-related financial stock) exploded from under $7 to as high as $256.44 late last week. That move in the online brokerage stock brought more attention to companies with similar models or share structures, as discussed in an article about low-float penny stocks.
Another point of focus for X Financial may also be on its recently filed annual results. Last week the company filed its Form 20-F for fiscal 2022. It saw higher loan facilitation for its Xiaoying Card Loans in 2022 compared to 2021 and 2020 by a wider margin. Furthermore, the total loan amount increased from RMB51,859 million in 2021 to RMB73,526 million in 2022.
List Of Penny Stocks
- X Financial (NYSE: XYF)
- MMTEC Inc. (NASDAQ: MTC)
- Huize Holding Limited (NASDAQ: HUIZ)