RBC Capital Markets said it sees US banks’ Q1 earnings-per-share growth versus the year-earlier quarter being driven “by net interest margin expansion resulting in higher net interest income, flat noninterest income, higher provision expense, and flat noninterest expense.”
However, the firm noted to clients that on a sequential basis, it expects US banks’ Q1 results to show “modestly lower net interest income, higher credit loss provisions, flat noninterest income, and higher noninterest expenses to result in slightly lower median EPS.”
For capital markets banks such as Bank of America (BAC), Citigroup (C), JPMorgan Chase (JPM), Goldman Sachs Group (GS) and Morgan Stanley (MS), RBC said it expects markets revenue to decrease approximately 14% from the year-ago quarter, driven by weakness in fixed income, currencies and commodities (FICC) and equities. However, the firm said it expects investment-banking revenue to increase 3.2% for the group, “driven by strength in advisory, mostly offset by weakness in underwriting.”
RBC continues to recommend that investors own three types of bank stocks: “Return of Capital (RC) Stocks” such as JPMorgan Chase, Bank of America, Regions Financial (RF), Citigroup, M&T Bank (MTB) and PNC Financial Services Group (PNC); “Risk On (RO) Stocks” such as Bank of America, Citigroup and KeyCorp (KEY); and “Multiple Revaluation (MR) Stocks” including PNC.