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In a new report, Deutsche Bank analyst Matt O’Connor discussed what the recent selloff in bank stocks means in terms of market expectations for 2016 bank earnings. O’Connor believes significant earnings downside has already been priced into bank stocks.
Deutsche Bank’s analysis indicates that the market is now expecting 10 percent downside to big U.S. bank earnings this year. O’Connor noted that, if macroeconomic conditions improve in the short-term, the bank selloff may prove to be an overzealous knee-jerk reaction. However, if the economy continues to deteriorate, he sees plenty more room to the downside for bank earnings.
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“We est [estimate] a modest C&I cycle could hit EPS by 10 percent and a haircutting of trading, ibanking and wealth/asset mgmt. would reduce mkt sens banks by another 7-10 percent,” O’Connor explained. He added that lower-than-expected net interest income represents up to 5.0 percent additional earnings downside.
O’Connor said Deutsche Bank sees real risk of a U.S. recession, but anticipates any recession would likely be a mild one.
A Few Names
Deutsche Bank maintains Buy ratings on the following market-sensitive and large regional banks:
- Bank of America Corp (NYSE: BAC)
- JPMorgan Chase & Co. (NYSE: JPM)
- Citizens Financial Group Inc (NYSE: CFG)
- M&T Bank Corporation (NYSE: MTB)
- PNC Financial Services Group Inc (NYSE: PNC)
- SunTrust Banks, Inc. (NYSE: STI)
- U.S. Bancorp (NYSE: USB)
- Wells Fargo & Co (NYSE: WFC)
Disclosure: The author owns shares of Bank of America.
Image Credit: Public DomainCrypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.
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