Big banks poised for multi-year inflection point, Wells Fargo's Mike Mayo says

seekingalpha07-22

Big banks' Q2 earnings support the case that the sector at a "multi-year inflection point from negative to positive revenue growth, operating leverage, and EPS growth," says Wells Fargo analyst Mike ...

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Mike Mayo says\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-07-22 04:15 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/news/4125864-big-banks-poised-for-multi-year-inflection-point-wells-fargos-mike-mayo-says><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Big banks' Q2 earnings support the case that the sector at a \"multi-year inflection point from negative to positive revenue growth, operating leverage, and EPS growth,\" says Wells Fargo analyst Mike ...</p>\n\n<a href=\"https://seekingalpha.com/news/4125864-big-banks-poised-for-multi-year-inflection-point-wells-fargos-mike-mayo-says\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU1201861249.SGD","symbol_name":"Natixis Harris Associates US Equity PA 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Mayo. The \"5 Cs\" — central banks, capital markets, costs, credit and capital — are working in favor of that outcome, he explained in a recent note to clients. Central banks and rates are leading to net interest income inflection in Q2 Q/Q and likely ahead. Capital markets showed the best improvement in three years. Costs showed slightly positive operating leverage in Q2. Credit losses increased only 1 basis point Q/Q. Capital levels climbed higher, leading to increased dividends and buybacks, he said. Meanwhile, rates, recession, and regulation — \"have likely reached their peak,\" he said. In addition, issues over unrealized securities losses have faded, helped by increases in tangible book value and the delay of Basel III endgame rules. Mayo's favorite stocks in the sector are Citigroup (NYSE:C), Bank of America (NYSE:BAC), and JPMorgan Chase (NYSE:JPM). Next on his list are U.S. Bancorp (NYSE:USB), PNC Financial (NYSE:PNC), and State Street (NYSE:STT). Here are some comments from Mayo on his top picks:  Citi (C): \"ROTCE guide for 2025/26 gives us more confidence that our estimated 10%+ ROTCE by 2026E is achievable, and if so, Citi should trade toward TBV of $110 in 2026.\" On the flip side, the penalty that the bank will pay the Office of the Comptroller of the Currency is \"another regulatory 'black eye'\" and indicates the consent order won't be lifted any time soon. Bank of America: \"We estimate an increase in NII increasing from $13.9B in 2Q24 to $15.1B by 4Q25E, leading to $62B in 2026E.\" Regarding fixed asset repricing, \"the runoff of $20B of assets each quarter adds est. $300M every quarter for several years (this can be haircut down to $200M assuming rate cuts).\" Mayo estimates a one-time boost of $400M by Q1 2025 and a boost of $100M every quarter for several years starting in Q3 2025 on swaps benefits. JPMorgan Chase (JPM): \"Goliath is winning, given returns revenue, and risk.\" ROTCE of 20% core would be 20.5% or 23% with lower CET1, Mayo wrote. Furthermore, revenue continues to outpace peers. He notes that JPM still says it is over-earning and faces tail risks, but the bank \"repurchased $5B in 2Q24, showed better than peer deposit pricing, and beat expectations on cap markets. It's as if JPM can 'win' either because it performs well or its negative forecasts prove correct.\"  SA Analyst Michael Gray as a different view. After digging into Citi's (C), JPMorgan Chases's (JPM), Bank of America's (BAC), and Wells Fargo's (WFC) Q2 earnings, he sees some troubling trends — asset growth has stagnated, deposits shrank, total loans are flat, net interest margin is declining, and asset quality is deteriorating.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.26.3","shortVersion":"4.26.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2453208557"}