JPMorgan Upgrades U.S. Bancorp, Raises Big Bank Price Targets Ahead Of Q1 Earnings

Big bank earnings season is just around the corner, and U.S. Bancorp USB landed a big Wall Street upgrade on Thursday ahead of its upcoming report.

The Analyst: J.P. Morgan analyst Vivek Juneja upgraded U.S. Bancorp from Neutral to Overweight and raised his price target from $53 to $60. Juneja also raised price targets of the other seven large cap banks stocks under his coverage: Bank of America Corp BAC, Citigroup Inc C, Citizens Financial Group Inc CFG Fifth Third Bancorp FITB, Regions Financial Corp RF, Truist Financial Corp TFC and Wells Fargo & Co. WFC. 

Related Link: BofA Upgrades CME Group, Bank Of NY Mellon On Expectations For Rising Interest Rates

The Thesis: In the upgrade note, Juneja said investors should expect extremely strong first-quarter numbers from big banks for two reasons.

First, an improving macroeconomic environment likely means banks are releasing their credit reserves. Second, an uptick in spending means higher card-related fees.

That potentially sharp uptick in spending is particularly good news for U.S. Bancorp, which Juneja said has the most exposure to sending given card-related fees accounted for about 16% of the company’s total revenue in 2019.

“Chase card spend data shows that volumes are 12% above 2019 levels recently, inflecting from running below 2019 levels at [the] end of February,” he said.

Airlines and hospitality spending accounted for 37% of merchant acquiring volumes and 7% of retail volumes in 2019, Juneja said. Credit card volumes will be particularly important for banks given they have higher fees than debit cards.

Juneja said U.S. Bancorp trades at an attractive valuation at just 13.5 times estimated 2022 earnings.

He is also bullish on several other big bank stocks heading into the first-quarter earnings season. J.P. Morgan also has Overweight ratings for Bank of America Corp, Citizens Financial Group Inc and Regions Financial Corp.

Benzinga’s Take: Bank earnings season kicks off on Wed., April 14 with reports from JPMorgan Chase & Co. JPM, Goldman Sachs Group Inc GS and Wells Fargo & Co.

Banks will likely put up some impressive first-quarter numbers, but it remains to be seen just how much earnings upside is already priced into their stock prices after big rallies in bank stocks year-to-date.

(Photo: U.S. Bank)