Wall Street’s views
Wall Street analysts have upgraded their ratings for bankers over the past couple of years. That’s due to improving interest margins, trading income, investment banking, and asset management fees amid macroeconomic growth. Since valuations of equities have stretched since the fourth quarter, managed assets growth is expected to be subdued. Corporates might even look at deleveraging for further improving valuations. Trading income is expected to remain volatile amid trade tensions, geopolitical issues, and valuation concerns.
Banks (XLF) can see marginally lower earnings on a sequential basis on lower trading income and credit offtake. However, YoY (year-over-year), performance is expected to improve due to lower taxes, higher trading, and asset management income.
Bank of America, Citi lead
Among major bankers, Bank of America (BAC) commands the most favorable rating with 22 analysts of 30 calling for a “buy” or “strong buy.” Seven have recommended a “hold,” and one has recommended a “sell.” Citigroup (C) has 17 “buy” or “strong buy” ratings out of 29. Ten analysts have given it a “hold”, and two have given it a “sell” or “underperform” rating.
JPMorgan Chase (JPM), the biggest banker in the United States, has 13 “buy” or “strong buy” ratings out of 28 analysts. Another 13 have recommended a “hold,” and two have given it a “sell.”
Wells Fargo (WFC) has the weakest ratings, with 12 out of 31 indicating a “buy” or “strong buy,” 15 recommending a “hold,” and the remaining four giving it an “underperform.”