Skip to main content

Market Overview

Bank Cheat Sheet: How Much EPS Downside Is The Market Pricing In?

Bank Cheat Sheet: How Much EPS Downside Is The Market Pricing In?

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.

Related Link: 'Credit Default Swap' Data Indicate Increasing Short-Term Market Risk

“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 Domain

Latest Ratings for BAC

Apr 2021Deutsche BankMaintainsBuy
Mar 2021Morgan StanleyMaintainsUnderweight
Jan 2021Atlantic EquitiesUpgradesNeutralOverweight

View More Analyst Ratings for BAC
View the Latest Analyst Ratings


Related Articles (BAC + CFG)

View Comments and Join the Discussion!

Posted-In: Deutsche BankAnalyst Color Long Ideas Top Stories Markets Analyst Ratings Trading Ideas General Best of Benzinga

Latest Ratings

GIKColliers SecuritiesInitiates Coverage On14.0
SANWLake StreetInitiates Coverage On6.0
LILAMorgan StanleyDowngrades15.0
BEJP MorganUpgrades36.0
NEXACredit SuisseUpgrades11.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Everything you need to know about the latest SPAC news.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at