Banking, finance, and taxes
Why Analysts Are Growing More Bullish on Major Bank Stocks After Earnings
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A few of the major banks kicked off the second quarter when they reported their most recent quarterly results last week. Although the initial reaction was somewhat negative from investors, analysts seem to believe that this could be a nice buying opportunity. Not to mention, more analysts are growing bullish on these major money center banks. And there are even more banks reporting to look forward to this week.
For the most part, analysts were thrilled with dividends and buybacks going higher in the third quarter after the Comprehensive Capital Analysis and Review (CCAR)—better known as the bank stress test.
24/7 Wall St. has included some highlights from what analysts are saying about these major banks that reported last week:
Wells Fargo & Co. (NYSE: WFC) was reiterated a Buy rating with a $62 price objective at Merrill Lynch. The brokerage firm went on to say:
Color from some investors implies that long-only investors have been steadily accumulating the stock since Investor Day. Other investors push back on timing as to when to buy the stock, rather than argue against the fundamental thesis (of a return to positive operating leverage), arguing that WFC is “dead money” until next year. We caution against waiting too long, as we expect ~100bp of progress in efficiency by 2H17. We think 2Q17 will represent a bottom in revenues for the year, and the efficiency improvement in the back half of the year should be revenue-driven – especially as we no longer expect any TLAC-related debt issuance. Meanwhile, we think the improvement in out-years will be expense driven, providing a material tailwind for EPS growth.
A few other analysts weighed in on Wells Fargo as well:
- Deutsche Bank maintained a Buy rating with a $60 price target.
- BMO cut its price target to $49 from $50.
- KBW cut its price target to $61 from $62.
Shares of Wells Fargo were last seen at $54.93, with a 52-week range of $43.55 to $59.99 and a consensus analyst price target of $58.19.
JPMorgan Chase & Co. (NYSE: JPM) was reiterated as an Outperform at Credit Suisse, and the price target was raised to $103 from $102. Credit Suisse detailed in its report:
Positives seen were 8% core loan growth, double digit retail deposit growth, better than expected investment banking, commercial banking and asset management revenues and a rebound in the card revenue rate; operating efficiency improved; credit costs were well below forecast even after additions to consumer-related loan loss reserves. Solid shareholder returns: $4.5bn net capital return; 14%+ return on tangible common equity (ROTCE) (11.5% ROCE) with 12.5% CET 1 (well above the 11% minimum).
Other analysts issued calls on JPMorgan:
- Merrill Lynch reiterated a Buy rating with a $99 price objective.
- Independent Research raised its price target to $96 from $95.
- KBW raised its target to $96 from $94.
- BMO raised its target to $86 from $85.
- Compass Point raised its price target to $83 from $80.
Shares of JPMorgan were last trading at $91.68, with a consensus analyst price target of $95.00 and a 52-week range of $63.38 to $94.51.
Citigroup Inc. (NYSE: C) was given an Outperform rating at Credit Suisse, and the firm raised its price target to $72 from $64. The brokerage firm said that factoring in longer term estimate increases and improved ROTCE prospects alongside accelerated capital returns would continue to push the stock higher.
A few other analysts commented on Citigroup:
- BMO raised its target to $65 from $64.
- Instient raised its price target to $78 from $74.
- RBC has an Outperform rating and raised its price target to $75.
- Merrill Lynch reiterated a Buy rating with a $75 price objective.
Shares of Citigroup were recently trading at $67.00. The stock has a 52-week range of $42.50 to $68.91 and a consensus analyst price target of $68.64.
Finally, analysts issued calls on The PNC Financial Services Group, Inc. (NYSE: PNC):
- Barclays has an Equal Weight rating and raised its price target to $132 from $130.
- Instinet raised its price target to $129 from $126.
- KBW raised its price target to $130 from $129.
- Morgan Stanley raised its price target to $136 from $134.
- Credit Suisse reiterated a Neutral rating and raised its price target to $126 from $114.
PNC shares were last trading at $127.92. The stock has a consensus analyst price target of $129.96 and a 52-week range of $81.35 to $131.83.
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