Source: Zhitong Finance
Over the past six months, the stock prices of the largest banks in the US have all risen sharply and outperformed the S&P 500 index. As the new earnings season begins, it is a question whether these large banks can maintain this momentum. Currently, the prospects for the Fed to cut interest rates are unclear, and investors will pay close attention in the next few days$JPMorgan (JPM.US)$,$Bank of America (BAC.US)$,$Wells Fargo & Co (WFC.US)$und$Citigroup (C.US)$Wait for the bank's first quarter results.
Since bottoming out in October last year, the increase in the stock prices of these large banks has surpassed that of the general market. However, Piper Sandler analyst R. Scott Siefers said, “These days, you don't usually see bank stocks outperforming the market. There's no doubt that the bar is higher.”
Investors will pay close attention to the bank's outlook and guidance on key profit drivers such as net interest income and investment banking. Morgan Stanley analyst Betsy Graseck said that the reduction in the Fed's interest rate cut may boost the net interest income prospects of many large banks and lead to an increase in financial forecasts.
Bank of America analyst Ebrahim Poonawala predicts that the results will “confirm” this year's excellent performance, and said that large banks “are prepared to deal with an uncertain (interest rates remain high for a longer period of time) macro background.” J.P. Morgan CEO Jamie Dimon warned in a recent annual shareholder letter that he believes the possibility of a soft economic landing is “far below” market expectations.
J.P. Morgan Chase, Wells Fargo, and Citibank will release financial reports on Friday. Bank of America,$Goldman Sachs (GS.US)$und$Morgan Stanley (MS.US)$Earnings will be announced next week.
Meanwhile, the stock prices of small banks have been under pressure since the US regional banking crisis in March last year. Although the stock prices of small banks rebounded after hitting a low point in October last year,$New York Community Bancorp (NYCB.US)$Small banks' stock prices were once again dragged down by the thunderstorm in early February. In response, analysts Keefe, Bruyette & Woods said that concerns about rent-controlled multi-family homes in New York have created opportunities to buy stocks in some local banks. More broadly, this has brought investors' concerns about asset quality (commercial real estate in particular) back into focus.
Bloomberg Intelligence analyst Herman Chan said that the performance of regional banks will ultimately depend on how New York Community Banks handle issues relating to their credit and capital. Community Bank of New York will announce results later in the quarter. Asset quality is a key uncertain factor for the bank, and net interest income appears to be “tepid.” “Healthy transactions and improving capital markets have boosted the profits of major US banks, while regional banks are facing concerns about weak credit quality and balance sheet growth,” he said.