Banking Stocks to Watch
JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), and Northern Trust (NASDAQ:NTRS) all saw gains in Friday afternoon trade as Morgan Stanley analyst Betsy Graseck saw the group as underrated asset-sensitive banks that will crush Q4 earnings.
Graseck anticipates that rising interest rates will promote yield expansion, particularly in commercial loans, putting aside Wells Fargo’s (NYSE:WFC) remedial procedure in connection with its retail sales debacle.
While the consensus for sales is $19.96B, down from $19.51B in Q3, WFC’s adjusted EPS is anticipated to decline to $1.01 from $1.30 in Q3. According to Graseck, good operating leverage will be the focus this year for JPMorgan (NYSE:JPM). She also believes that increased capital requirements, such as Common Equity Tier 1, are progressing (CET1).
The average analyst estimate for sales is $34.19B, up from $32.72B in Q3, while adjusted EPS is anticipated to remain constant at $3.12 in the fourth quarter. Magdalena Pacholska, a Seeking Alpha writer, sees a “very good” technical setup creating the conditions for a breakout.
Although Northern Trust doesn’t offer NII guidance, Graseck pointed out that last month’s upward projection revisions from competitors BNY Mellon and State Street are positive for NTRS.
One item to watch out for is that the business “may see another major fall down in average NIB deposits, which decreased 28%” in Q3. However, “we think that fears are overstated since the majority of rate sensitive institutional and wealth operating deposits have already migrated in 2Q and 3Q,”
Its non-GAPP EPS of $1.80 in the third quarter is expected to remain the same in the fourth quarter, but revenue is expected to decline to $1.76 billion from $1.77 billion in the third quarter.
Featured Image: Pexels @ Anna Tarazevich