Deutsche Bank Positive On Large Cap Banks Into Fourth Quarter Results

Banking analysts at Deutsche Bank made some positive comments on bank stocks today ahead of upcoming fourth quarter results. The firm said while they see another sluggish quarter for bank earnings, expectations are low and there are some positives.

The firm notes that while bank stocks have seen some recent improvement in performance during the past weeks, the group in general has meaningfully underperformed the overall market in recent months, which they said results in attractive valuations.

BB & T Corp. (NYSE: BBT), Citigroup (NYSE: C) and Wells Fargo & Company (NYSE: WFC) are Deutsche Bank's top picks in the sector. They also have Buy ratings on Huntington Bancshares Inc. (Nasdaq: HBAN), JPMorgan Chase & Co. (NYSE: JPM) and US Bancorp (NYSE: USB).

The firm said potential positives in 4Q are:

1. A further slowdown in the pace of credit deterioration
2. Reserve build is likely coming to an end
3. early signs that commercial loan growth is picking up

They said while these are clear positives, most banks will still lose money, nonperformers will continue to increase, net interest revenue will remain pressured, and fees will be down quarter over quarter. However, none of these should be a surprise according to the firm.

The firm expects 11 of the 18 banks they cover to report losses in Q4. The weakest they think will be Comerica (NYSE: CMA), SunTrust Banks, Inc. (NYSE: STI) and Zions Bancorp. (Nasdaq: ZION). They expect the strongest to be JPMorgan Chase & Co. (NYSE: JPM), PNC Financial Services Group Inc. (NYSE: PNC) and Wells Fargo & Company (NYSE: WFC).

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