Over the last five trading sessions, efforts by banks to resolve litigations dominated headlines. The biggest news pertained to the settlement of the allegations regarding foreign currency (‘FX”) market manipulation. Some of the major global banks were part of the settlement.

Apart from this, few other lawsuits were resolved, while a couple of cases were even dismissed by the court. Hence, on a whole, the last five trading sessions were dominated by litigations.

(Read the last Bank Stock Roundup for May 15, 2015)

Recap of the Week’s Most Important Developments:

1. The much anticipated settlement related to the FX market manipulation was eventually announced. In aggregate, major banks will be paying nearly $6 billion to the U.S. and U.K. regulators to settle various charges.

Regulators accused Citigroup Inc. (C - Analyst Report), JPMorgan Chase & Co. (JPM - Analyst Report), The Royal Bank of Scotland Group plc (RBS - Snapshot Report), UBS Group AG (UBS) and Barclays PLC (BCS - Analyst Report) of conspiring for manipulation of the FX market. Aside from UBS Group, Citigroup's main banking subsidiary, Citicorp, and the parent companies of JPMorgan, Barclays and Royal Bank of Scotland pleaded guilty to the U.S. Department of Justice (“DOJ”) for the aforesaid charges.

Notably, UBS Group pleaded guilty for breaching its Dec 2012 non-prosecution agreement (“NPA”) over manipulation of the Libor benchmark interest rate. Apart from these five banks, Bank of America Corp. (BAC - Analyst Report) avoided guilty plea, although it was fined (read more: Major Banks Penalized for FX Market Rigging, Plead Guilty).

2. In a major relief to U.S. Bancorp (USB - Analyst Report) and BofA, the U.S. District Judge in Manhattan dismissed three lawsuits. The cases pertained to the allegations that banks failed to perform their duties as trustees for residential mortgage-backed securities (“RMBS”). Nevertheless, the judge permitted all plaintiffs to re-file some of their claims (read more: BofA & U.S. Bancorp Win Dismissal of 3 RMBS Lawsuits).

3. The Bank of New York Mellon Corp. (BK - Analyst Report) has reached a settlement in principle over FX-related class action lawsuit that alleged violations of securities law. The company disclosed this in a filing with the Securities and Exchange Commission (“SEC”).

Under the terms of the settlement, BNY Mellon will be paying $180 million to settle the allegations. This will result in a pre-tax charge of $50 million in the second quarter of 2015.

The lawsuit sued BNY Mellon for deceiving customers by overcharging them for FX transactions. The complainant accused the company of fraudulent representation wherein the bank, while conducting FX trades, did not provide the best possible prices to its customers.

The settlement releases BNY Mellon from all FX-related securities law claims brought against it by members of the alleged class. Moreover, though this resolves nearly all pending FX-related actions, several lawsuits by individual customers will continue. Notably, the settlement requires approval from the court.

4. As per a Bloomberg report, a lawsuit filed by the shareholders of JPMorgan has been dismissed. The case was related to the losses incurred by shareholders over ‘London Whale’ fiasco.

The stakeholders had accused JPMorgan executives of violating federal securities laws by misrepresenting the facts about the risk levels of the company’s derivative trading. Hence, when ‘London Whale’ losses were made public, the shares of the company fell.

However, Delaware Chancery Court Judge Sam Glasscock ruled that “Disgruntled JPMorgan shareholders accusing the bank’s board, including Chief Executive Officer Jamie Dimon, of being asleep at the switch can’t re-litigate their claims over losses from botched bets on derivatives.”

5. Citigroup is yet again encountering another setback from the government of Argentina. Citibank Argentina has been ordered by an Argentine court to not undertake any further steps toward its decision to quit the custodian role of some Argentine sovereign bonds. The news was reported by Reuters.

Undoubtedly, the latest order comes as a huge blow for Citigroup, which is already under fire from Argentina. After suspending the company from conducting capital market operations in the country, the government of Argentina filed a lawsuit against the New York-based bank last month as Citigroup reached an agreement in March with hedge funds that are engaged in a long standing legal tussle with the country (read more: Citi Barred from Exiting Custodian Role by Argentine Court)

Price Performance

Performance of banking stocks remained optimistic over the last five trading days. Resolution of the major FX market rigging probe removed a big legal headwind for the banks. Also, other cases that were either dismissed/resolved added to the optimism.

In the last five trading sessions, BofA was the top gainer, with shares increasing 2.3%. It was followed by Capital One Financial Corp. (COF - Analyst Report) and The PNC Financial Services Group, Inc. (PNC - Analyst Report), with their shares rising 1.3% each. On the other hand, shares of US Bancorp fell marginally.

Over the last six months, JPMorgan and PNC Financial were the top performers, with their shares advancing 11.7% and 10.6%, respectively. However, BofA declined 1.7%.

What's Next in the Banking Universe?

In the coming five days, we do not expect any major unprecedented incident on the banking front.