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Deutsche Bank Analyst Sees Lower Q2 Profits At Major Banks

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Major banking companies are likely to post lower profits in the upcoming quarter according to a Deutsche Bank analyst, continuing a theme that's dogged the industry for much of the past year.

Although big bank stocks are up four percent in the year-to-date, earnings are stalled following last year's stellar 35 percent growth rate.

Best bets in the sector right now according to Deutsche Bank's Rob O'Connor: Bank of America (NYSE: BAC) Goldman Sachs (NYSE: GS) and JPMorgan Chase & Co. (NYSE: JPM).

Among super-regional banks, O'Connor singled out for investment Fifth Third Bancorp (NASDAQ: FITB) and M&T Bank Corp. (NYSE: MTB)

O'Connor expects second-quarter profits on average for the group will fall five percent to 10 percent from a year earlier, and flat versus the first quarter. Earnings year-to-date have been held back in part by a slowing pace of bond purchases by the Federal Reserve, which pump cash into the economy. O'Connor said the so-called tapering has particularly hurt fixed income trading, which he thinks will again miss the Wall Street second-quarter consensus.

Meanwhile, the regional banks have been hit by higher-than-expected credit costs and slowing loan growth.

O'Connor expects full-year earnings growth for large-cap banks of just three percent. By 2015, that rate should pick up to nine percent, increasing to 13 percent by 2017.

"However, that growth is dependent on a much stronger economy and higher interest rates," O'Connor said in the note, in which he assumes economic growth of five percent by 2017.

Latest Ratings for BAC

DateFirmActionFromTo
Dec 2014Guggenheim SecuritiesInitiates Coverage onBuy
Oct 2014FBR CapitalUpgradesMarket PerformOutperform
Oct 2014UBSUpgradesNeutralBuy

View More Analyst Ratings for BAC
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Posted-In: Deutsche Bank Rob O'ConnorAnalyst Color Analyst Ratings

 

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