Surprise, Surprise... Q3 Bank Results Weren't that Bad
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Rating Summary:
30 Buy, 11 Hold, 2 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 0 | Down: 0 | New: 0
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Analysts at Deutsche Bank made positive comments on U.S. large cap banks post Q3 earnings results.
What they learned in the quarter is: 1) There seems to be more focus on expenses/efficiency initiatives. 2) Mortgage will likely continue to improve in 4Q. 3) Mortgage/litigation drags moderated and we may be in the late innings (hopefully). 4) The capital markets bar seems to be set low for 4Q. 5) Debit card hits seem more likely to be offset over time. 6) NIM volatility should be less in 4Q. 7) Capital is building at a good pace and capital deployment is likely (but not until Feb/March). 8) Credit continues to improve (albeit more slowly). 9) Euro exposures seem manageable
The firm noted that 13 of 17 banks that they cover beat the consensus estimates, with upside driven by credit improvement, modestly higher revenue, higher earning assets, mortgage originations and service fees. On the other side, NIM was choppy quarter-over-quarter and was generally disappointing. In addition, trade was down 32% quarter-over-quarter and 35% year-over-year, with Investment banking down 43% quarter-over-quarter and 26% year-over-year. Also in the quarter, capital improved and there were no mortgage-related surprises.
The firm's top picks in the sector are Citi (NYSE: C), Regions Financial Corp. (NYSE: RF) and Wells Fargo & Company (NYSE: WFC).
On Citi, the firm notes Europe looks manageable Also there was good progress on Citi Holdings and improving core operating leverage w/ solid capital & less mortgage/reg. fee risk. They said valuation still looks attractive at 0.6x tangible book and 6-7x 2013 EPS (vs. 8x for the group).
On Regions, the firm notes balance sheet de-risking, credit cost improvement, and
cost-cutting to continue w/no S-T pressure to repay TARP as capital builds. NIM
should hold up better than expected. Regions has the lowest P/E (5x) and P/TBV (0.6x) of the stocks they cover.
On Wells Fargo, the firm notes revenue/fees likely to rebound in 4Q, given likely strong mortgage results, market share gains, and better NIM/net II trends. The said valuation still looks attractive at 7x normal earnings vs. 8x for other banks.
What they learned in the quarter is: 1) There seems to be more focus on expenses/efficiency initiatives. 2) Mortgage will likely continue to improve in 4Q. 3) Mortgage/litigation drags moderated and we may be in the late innings (hopefully). 4) The capital markets bar seems to be set low for 4Q. 5) Debit card hits seem more likely to be offset over time. 6) NIM volatility should be less in 4Q. 7) Capital is building at a good pace and capital deployment is likely (but not until Feb/March). 8) Credit continues to improve (albeit more slowly). 9) Euro exposures seem manageable
The firm noted that 13 of 17 banks that they cover beat the consensus estimates, with upside driven by credit improvement, modestly higher revenue, higher earning assets, mortgage originations and service fees. On the other side, NIM was choppy quarter-over-quarter and was generally disappointing. In addition, trade was down 32% quarter-over-quarter and 35% year-over-year, with Investment banking down 43% quarter-over-quarter and 26% year-over-year. Also in the quarter, capital improved and there were no mortgage-related surprises.
The firm's top picks in the sector are Citi (NYSE: C), Regions Financial Corp. (NYSE: RF) and Wells Fargo & Company (NYSE: WFC).
On Citi, the firm notes Europe looks manageable Also there was good progress on Citi Holdings and improving core operating leverage w/ solid capital & less mortgage/reg. fee risk. They said valuation still looks attractive at 0.6x tangible book and 6-7x 2013 EPS (vs. 8x for the group).
On Regions, the firm notes balance sheet de-risking, credit cost improvement, and
cost-cutting to continue w/no S-T pressure to repay TARP as capital builds. NIM
should hold up better than expected. Regions has the lowest P/E (5x) and P/TBV (0.6x) of the stocks they cover.
On Wells Fargo, the firm notes revenue/fees likely to rebound in 4Q, given likely strong mortgage results, market share gains, and better NIM/net II trends. The said valuation still looks attractive at 7x normal earnings vs. 8x for other banks.
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