Citi's Q1 Earnings Cheat Sheet For US Banks

Citi prefers JPMorgan Chase & Co.

and Citizens Financial Group Inc

heading into the "weak" first quarter earnings season, while Goldman Sachs Group Inc

and KeyCorp

remain its top picks in the banking space. "No surprise 1Q is going to be a weak quarter; favor JPM and CFG in 1Q," analyst Keith Horowitz wrote in a note to clients. He continued: "We estimate 1Q16 EPS of $1.28 for JPM, 2c ahead of consensus of $1.26. While this could be a nice headline to kick off earnings season, we don't see this as a sign of things to come as we expect misses or inline results relative to consensus for 13 of our 18 names as weaker fee revenue across trading, Ibanking, asset management, and servicing businesses, as well as higher provision expense due to reserve builds for Energy are expected to weigh on earnings in 1Q." "We see the beat for JPM driven mainly by lower expenses relative to consensus while we think an inline result for CFG could drive near-term outperformance given the recent weakness in the stock," Horowitz noted. But, the analyst warned investors against "using that (JPM beat) as a read-through to the group. "Overall, we expect results mostly below consensus in 1Q16 for our coverage. We see downside for regional names – We expect results to be below consensus for 7 of our 11 regional names in 1Q16," Horowitz elaborated. The analyst sees the biggest misses for Regions Financial Corp

and SunTrust Banks, Inc.

. "We expect a 2c miss for RF driven by both higher expenses, which we think may be driven by higher compensation expense. We see a 5c miss for STI on lower I-banking fees and higher provision expense." Citi sees downside for the capital markets names. Earnings of Goldman Sachs and Bank of America Corp

are expected to be below consensus at $2.34 and $0.21, respectively. The brokerage sees the most downside for Morgan Stanley

. We estimate 1Q16 EPS of $0.42 for MS, 19% below consensus of $0.52. On BAC, the analyst said he "expect miss but bar is fairly low for capital markets names and would not expect significant underperformance." However, the analyst continues to see the best value in GS and KEY. "GS and KEY remain our top picks in the group. For KEY, we see the FNFG increasing ROTE by roughly 200 bp which should lead to multiple expansion," the analyst noted. Horowitz continued: "For GS, we believe the market is overly focused on very challenging markets and with the stock trading below tangible book value we believe the market is underestimating GS ability to recalibrate the model to deliver double digit returns and/or the probability that markets can improve quickly." Horowitz added: "Although we see misses for both names in 1Q we don't think investors need to wait to establish positions in these names as we think the bar is already fairly low for both. As a result, a miss in 1Q is unlikely to drive significant near-term underperformance, but we would add to existing positions on any weakness." Meanwhile, the brokerage lowered its target price for Goldman by $7 to $185, but raised target prices for Comerica Incorporated

by $5 to $42 and Fifth Third Bancorp

by $1 to $18.