Kalkine Media lists financial stocks to watch after another rate-hike

By - Rupam Roy


  • The Federal Reserve announced another 75-bps point hike on November 2.
  • Raymond James (NYSE: RJF) noted a 4% quarter-over-quarter growth in its Q4 FY22 revenue.
  • Net revenue of Ameriprise Financial, Inc. (NYSE: AMP) rose 20 per cent YoY in Q3 FY22.

Changes in interest rates generally move in tandem with economic health, meaning, it rises when the economy grows and falls during times of stagnant scenario. The Federal Reserve plays an important role in rate hike decisions, as the officials set the policy rates.

The officials generally lessen the rates when economic growth slows and raises them to cool down demand when inflationary concerns hover over the market. The Fed Reserve, after its two-day meeting, again hiked the interest rate by another 75 basis points on Wednesday, November 2.

The central bank has been raising the rates throughout the year, which has weighed on the overall market's performance. The US equity market has been hit due to the aggressive hikes by the Federal Reserve this year.

However, investors generally keep a close watch on the financial stocks after the rate-hike decisions. At the start of the third quarter earnings as well, which kicked off with the bank earnings, it is seen that some banks benefited from the higher rates.

Some of the popular financial firms include Arch Capital Group Ltd. (NASDAQ: ACGL), Raymond James Financial, Inc. (NYSE: RJF), Arthur J. Gallagher & Co. (NYSE: AJG), Hartford Financial Services Group, Inc. (NYSE: HIG), and Ameriprise Financial, Inc. (NYSE: AMP).

Let's take a quick tour of the recent stock performances and other key details about the companies amid the soaring costs and rate-hike woes:

Arch Capital Group Ltd. (NASDAQ: ACGL)

The insurance firm, Arch Capital Group Ltd.’s market cap is over US$ 20.76 billion. The stock of the company, which provides a range of insurance, reinsurance, and mortgage-related services, rose over 26 per cent YTD and 30 per cent YoY.

In the fourth quarter through November 3, it rose around 23 per cent and touched its 52-week high of US$ 58 on the last day of October this year.

The company's Q3 FY22 earnings results from October 26 showed that its net premiums earned in the quarter were US$ 2.47 billion, an increase of 28.1 per cent YoY.

The net income applicable to Arch Capital Group's shareholders was US$ 6.91 billion in Q3 FY22, against US$ 388.75 million in Q3 FY21.

The company had made its place in the S&P 500 index replacing Twitter, effective from Tuesday, November 1.

Raymond James Financial, Inc. (NYSE: RJF)

The stock of the investment banking and financial services company, Raymond James Financial holds a dividend yield of 1.15 per cent. The RJF stock was up over 16 per cent YTD while showing about the same percentage gains on an annual basis, after closing at US$ 117.38 on November 2.

In the running quarter, it was up over 18 per cent and touched its 52-week high of US$ 120.5596 on Tuesday, November 1.

In the final quarter of fiscal 2022, Raymond James Financial's revenue rose five per cent YoY and four per cent QoQ to US$ 2.83 billion, and its net income available to common shareholders was US$ 1.98 per diluted share.

The company's annual revenue surged 13 per cent YoY to US$ 11 billion, and its reported diluted EPS was US$ 6.98 apiece, up five per cent YoY.

Arthur J. Gallagher & Co. (NYSE: AJG) 

The insurance brokerage and risk management services provider, Arthur J. Gallagher holds a dividend yield of 1.09 per cent. The stock of the risk management and consulting services firm gained around nine per cent YTD and 13 per cent YoY.

Arthur J. Gallagher's revenue was US$ 2.04 billion in Q3 FY22, and its net earnings were US$ 256.3 million, against an income of US$ 238.6 million on revenue of US$ 2.13 billion in Q3 FY21.

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Hartford Financial Services Group, Inc. (NYSE: HIG)

Hartford Financial Services is an insurance and investment firm with a dividend yield of 2.09 per cent. The stock of the US$ 23.02 billion market cap firm ticked up about four per cent YTD and over 16 per cent QTD.

The revenue of Hartford Financial Services Group was US$ 5.58 billion in Q3 FY22, and its net income was US$ 339 million, compared to an income of US$ 482 million on revenue of US$ 5.68 billion in Q3 FY21.

Ameriprise Financial, Inc. (NYSE: AMP)

The financial and bank holding firm, Ameriprise Financial's dividend yield was 1.59 per cent. The stock of the diversified bank holding firm rose over two per cent YTD and 22 per cent QTD through November 2.

On October 25, the company announced a quarterly cash dividend of US$ 1.25 on its per common share, which would be payable on November 18 later this month.

According to its latest quarter earnings release of October 25, Ameriprise Financial's net revenue rose 20 per cent YoY to US$ 3.49 billion, and its net income declined 47 per cent YoY to US$ 548 million in Q3 FY22.

Bottom line:

The Federal Reserve announced another three-quarter of a percent hike in the policy rates on Wednesday, November 2. This 75-bps point jump is seen for the fourth time this year, the last being on September 21.

The central bank has said earlier that it is committed to bringing down the inflation to its target range of two per cent, but despite the hawkish moves, the inflation remained elevated.

On the other hand, the latest labor market and GDP data also showed that the economy was resilient to the higher rates, which also gave more space to the policymakers to move with their aggressive campaign.

The Fed officials indicated on Wednesday that future surges in borrowing costs could be taken in smaller steps. Fed Chair Jerome Powell said in his press conference on November 2, that the change in pace could be noticed at Fed's next gathering in December.However, he also signaled that it is still not certain to which level they might have to raise the policy rates, and it might end up higher than the officials had anticipated at their last meeting in September.

Talking about the performance of the financial sector, the S&P 500 Financials segment fell over 16 per cent YoY, and about 14 per cent YTD, while the overall index fell over 18 per cent YoY and around 21 per cent YTD through November 2.