Deutsche Bank Cautious On Banks Heading Into Q2 Results, Sees More Losses Ahead and Maybe Another $300B In Capital Raises (BBT, JPB, USB, WFC, STI, BAC)
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Deutsche Bank issued unsettling comments on U.S. banks stocks heading into second quarter results. The firm remains cautious and expects continued weak bank results as credit pressures mount. In fact, the firm expects 10 of the 16 banks that they cover to report losses this quarter.
Deutsche Bank expects banks to report losses for the 2nd-half of 2009 and much of 2010. They also said normalized EPS is further away than most expect and will be lower than current estimates. They said this is being driven by consumer losses remaining elevated longer than expected, commercial and related losses possibly reaching 10%-11% in 2009-2011 (versus the consensus of just 4%) higher than expected, and potentially another $200-$300 billion in additional capital raises.
Key industry trends DB is highlighting for Q2 includes: charge-offs and nonperforming assets may both rise 25%-30%, net interest margins should rebound - up 3-5bps, mortgage and trading could approve robust Q1 levels, one-time FDIC cost to reduce Q2 EPS by $0.08 on average, BB&T (NYSE: BBT), JP Morgan (NYSE: JPM), TCF Financial (NYSE: TCB), U.S. Bancorp (NYSE: USB) will take charges to pay back TARP, banks will have securities gains and other than temporary impairments from downgrades of non agency RMBS and CMBS.
For the quarter, Deutsche Bank sees the weakest results potentially at KeyCorp (NYSE: KEY), Marshall & Ilsley (NYSE: MI), SunTrust Banks (NYSE: STI) and Zion Bancorp (Nasdaq: ZION). On the other hand, the firm said Wells Fargo (NYSE: WFC) could have the strongest quarter due to robust mortgage and trading results and solid balance sheet/net interest margin trends.
Other banks mentioned: Bank of America (NYSE: BAC), Comerica (NYSE: CMA), First Horizon (NYSE: FHN), Fifth Third (Nasdaq: FITB), Huntington (Nasdaq: HBAN), M&T Bank (NYSE: MTB), PNC (NYSE: PNC), Regions Fin (NYSE: RF).
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