While the beginning of the year sell-off appears to be taking a day off, the fourth-quarter earnings season is about to ramp up, and some of the biggest banks on Wall Street will be reporting earnings starting as early as Wednesday. While a scenario of rising rates can be helpful to some banks as net interest margin can increase, banks that miss earnings estimates into an already weak market could be in trouble.

In a new report, Deutsche Bank is less than thrilled with the prospects for some of the bigger banks, given that gross domestic product growth is way too slow for the Federal Reserve to be very aggressive. In fact, the firm sees just one more rate hike in 2016, and most likely it would be 25 basis points, or one-quarter of 1%. The analysts are bullish on three super-regionals, and all three report earnings this week.

PNC Financial Services

Shares of this top regional bank are down over 10% in just the past month. PNC Financial Services Group Inc. (NYSE: PNC) is one of the largest U.S. diversified financial services organizations, providing retail and business banking; residential mortgage banking; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management and asset management. With consistent earnings growth and a very positive and growing loan portfolio, the company is a premiere super-regional bank stock to own.

Deutsche Bank points to numerous positives, including the bank implementing huge cost savings plans, and the fact the bank highlighted up to $100 million of new savings earlier this year. The firm also cites the bank’s outstanding credit/risk management and the limited exposure to the capital markets related areas.

The bank stands to benefit the most from the recent Fed rate hike, feels Deutsche Bank, with a 10 basis point boost to net interest margin worth an estimated $85 million in new interest income. The firm also notes that the bank has a $34 billion liquidity position, some of which it feels gets appropriated in coming quarters.

PNC shareholders receive a solid 2.31% dividend. The Deutsche Bank price target for the stock is $101, while the Thomson/First Call consensus target is $100.23. Shares closed Monday at $88.28. The bank is scheduled to report on Friday.
U.S. Bancorp

This is another top super-regional bank that Deutsche Bank favors for 2016. U.S. Bancorp (NYSE: USB) has $419 billion in assets as of June 30, 2015, and it is the parent company of U.S. Bank National Association, the fifth largest commercial bank in the United States. The company operates 3,164 banking offices in 25 states and 5,020 ATMs, and it provides a comprehensive line of banking, investment, mortgage, trust and payment services products to consumers, businesses and institutions.

Deutsche Bank notes that the bank has underperformed other larger regional banks over concerns about lower revenue and higher expenses. Also, the fact that USB has no meaningful capital markets exposure and has among the best risk management/credit profile in the industry, and it generates the highest returns of peers.

The 2015 headwinds should abate this year, predicts Deutsche Bank, which points out that management at the bank is committed to reducing expense growth. That in turn should lead to more revenue to the bottom line.

US Bancorp investors receive a 2.57% dividend. Deutsche Bank has a $47 price target, and the consensus price objective is $46.88. Shares closed most recently at $39.86. The bank is scheduled to report on Friday.

Wells Fargo

This large cap bank is another for investors to look at now for safety and dividends. Wells Fargo & Co. (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.8 trillion in assets. It provides banking, insurance, investments, mortgage and consumer and commercial finance through 8,700 locations, 12,800 ATMs, the Internet and mobile banking, and it has offices in 36 countries to support customers who conduct business in the global economy. Wells Fargo serves one in three households in the United States.

Wells Fargo has slowly, but surely, become one of the biggest mortgage lending companies in the United States, in addition to its normal banking and brokerage businesses. A continued increase in commercial real estate lending could really boost the bank’s bottom line. The analysts feel that could aid a big return in capital to shareholders. The stock also remains a top Warren Buffett holding.

Deutsche Bank likes the stability, yield and some asset sensitivity that the bank offers, and investors looking to add financials to their portfolio could do well buying shares. Fortunately, Wells Fargo has little exposure outside of the United States, but 2016 could be a transitional year, with slow earnings per share growth, and expenses could run higher due to the GE acquisitions and tech and cyber upgrades.

Wells Fargo shareholders receive a 3.0% dividend. The $60 Deutsche Bank price target is higher than the consensus estimate of $58.64. Shares closed Monday at $50.09. The bank also reports on Friday.

These top bank stocks provide very solid total return potential. More conservative accounts looking to add new positions would be well served buying any of the three for the rest of 2016. As a side note, all traded up on Monday.

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