Major US banks are expected to report "robust" Q4 capital markets revenue, especially in trading and equity capital markets, with Citigroup (C) seen as the top pick, Morgan Stanley said Tuesday.
The firm said that JPMorgan Chase (JPM), State Street (STT) and U.S. Bancorp (USB) are also among its most preferred stocks heading into the earnings reports.
"While banks already surprised to the upside with strong 4Q24 trading guidance at an early December industry conference, we expect trading revenues could come in even higher given the typical seasonal December slowdown just didn't happen," Morgan Stanley said in a note to clients. "We expect capital markets beats in the quarter, positive commentary on 2025 pipelines, the benefit of a steeper curve to drive up 2025 guidance with our 2025 EPS median 4% above the Street."
The brokerage expects Citigroup's Q4 earnings of $1.24 per share, which it said was 3% above Wall Street's estimates, while its investment banking revenue is expected to grow 37% year-over-year. Morgan Stanley projects the company's 2025 revenue at $84.1 billion, compared with the Street's $83.1 billion view.
The firm pegs JPMorgan's Q4 EPS at $4.43, which is said was 11% above the Street's estimates.
For State Street, Morgan Stanley expects both an earnings beat and upbeat outlook, along with potential clarity on its chief financial officer transition, according to the note.
"USB comes into the quarter with a nice set-up to deliver an EPS beat together with upbeat guidance for the full year," Morgan Stanley said.
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