J.P.Morgan Shareholders Ok Pay; Small Banks Gain Powerful Ally: Finance Winners and Losers

NEW YORK (TheStreet) -- Banks large and small may be poised for a boost once the Federal Reserve raises interest rates.

Financial stocks have been tracking slightly higher than the S&P 500 in recent weeks amid speculation about whether the Fed might approve a rate increase in June or September, the first since the financial crisis of 2008.


Executives at J.P. Morgan Chase (JPM) and Morgan Stanley (MS) can rest easier after shareholders approved their 2014 compensation packages. Both the New York banks held their annual shareholder meetings on Tuesday. While the news for management was good at both, the win at Morgan Stanley may have been a little sweeter.

According to preliminary results, 89% of votes cast were in favor of Morgan Stanley CEO James Gorman's 2014 compensation of $22.5 million. Meanwhile, preliminary results at J.P. Morgan showed just 61% of votes cast were in favor of CEO Jamie Dimon's 2014 compensation of $20 million.

Leading up to Tuesday's meeting, proxy advisory services Institutional Shareholder Services and Glass Lewis advised shareholders to vote against J.P. Morgan's proposed compensation structure. Their critique, however, wasn't the amount of compensation being sought, instead the companies wished that JPMorgan provided more consistency and transparency in how it arrives at its compensation figures.

Shares of J.P. Morgan closed up 59 cents at $67.01 while shares of Morgan Stanley closed up 36 cents at $38.69.


Bank of America (BAC) approached a four-month high during Tuesday's trading, almost reaching $16.79 amid a boost from trader speculation about an interest-rate increase.

It was a noteworthy boost for a company that has weathered criticism from both analysts and shareholders in recent months because its stock lagged peers. A growing contingent of analysts now suggests there's reason to be bullish on the Charlotte, N.C.-based bank.

Last week, Matt O'Conner, an analyst with Deutsche Bank, said Bank of America represented the "purest play on US growth/rates among peers." Similarly, banking analyst Nancy Bush said the bank would get a "double kick" from a Fed rate hike. The first kick would come from economic conditions improving to a point that the Fed can raise rates. The second kick would come from the rate hike itself, which would have a positive effect on the bank's net interest margins.

Bank of America closed up 26 cents to $16.77. 


Finally, small banks and small businesses just gained a powerful ally. In a speech at in Cedar Falls, Iowa, on Tuesday, Hillary Clinton, called out the excessive regulation that makes it difficult to for small banks to lend to small businesses.

"For many small businesses [these] loans have always come from community banks with deep local ties," Clinton, a 2016 Democratic presidential candidate, told the crowd. "But today those same local banks are being squeezed by regulations that don't make sense for their size and mission, like endless examinations and paperwork designed for banks that measure their assets in the many billions."

The struggles of small and regional banks have been well documented since the financial crisis. Though smaller banks are rarely, if ever, engaged in some of the riskier lines of business of their larger counterparts, they are often subject to the same rules and regulations.

Currently there is a bipartisan effort in Congress to lessen the regulatory burden for small banks. However, efforts stalled last week when Democrats pushed back against a Republican sponsored bill that would offer some regulatory relief for banks with as much as $500 billion of assets. Democrats argue that this threshold is too high.

More from Investing

Inside Carnival's Mind Blowing New Horizon Cruise Ship (Video)

Inside Carnival's Mind Blowing New Horizon Cruise Ship (Video)

Neel Kashkari: The Heart of Our Financial System Is More Radioactive Than Ever

Neel Kashkari: The Heart of Our Financial System Is More Radioactive Than Ever

McDonald's Criticized for Not Doing More in Wake of Sexual Harassment Claims

McDonald's Criticized for Not Doing More in Wake of Sexual Harassment Claims

Finding Stocks Right for You: Cramer's 'Mad Money' Recap (Friday 8/25/18)

Finding Stocks Right for You: Cramer's 'Mad Money' Recap (Friday 8/25/18)

Jim Cramer: The 10-Year Yield Could Go to 2.75%

Jim Cramer: The 10-Year Yield Could Go to 2.75%