While Fears Rule, Goldman Sachs Sees Bright Spots In Financials (JPM, BAC, C)
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Up: 8 | Down: 5 | New: 26
Rating Summary:
22 Buy, 25 Hold, 1 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Analysts at Goldman Sachs commented on U.S. banks before the important second quarter earnings season which starts in earnest on Friday, July 15.
The firm expects the quarter to highlight improving consumer credit. However, with investors fears about regulation, a double dip in housing, and a trading slowdown, outlooks offered by the banks may matter as much as results.
Some key themes for the quarter include: Credit, Rates, Fees, and Capital Building; TARP Raises.
On Credit, Goldman said with card delinquencies falling 10% in the quarter, and card charge-offs making up appox. 50% of the credit costs at JP Morgan (NYSE: JPM), Bank of America (NYSE: BAC) and C (NYSE: C), "provisions may fall faster than investors realize."
On Rates, Goldman said with rates down again, CD re-pricing continues with KeyCorp (NYSE: KEY) and Huntington Bancshares Inc. (Nasdaq: HBAN) offering the most leverage.
On Fees, Goldman said trading revenues will be down from 1Q. They said this is largely priced into the stocks, although dispersion of trading results is still a wild card. They said FX trading is one bright spit, which makes Northern Trust (NTRS) at compelling Buy.
On Capital Building; TARP Raises the firm said "capital will build with stronger banks likely shifting targets for dividends to 1Q11." Regionals still need to raise approx $20B to repay TARP, and capital raising may come after Q2 results. The $20B is a drop in the bucket compared to the $350B raised over the past 3 years, the firm notes.
The firm's favorite ideas into Q2 are: Conviction Buy List-rated JP Morgan (NYSE: JPM) and Bank of America (NYSE: BAC) and Buy-rated Citigroup (NYSE: C) on improving consumer credit; KeyCorp (NYSE: KEY) on better than expected net interest margin as CDs re-price; Northern Trust (Nasdaq: NTRS) on upside from FX trading.
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The firm expects the quarter to highlight improving consumer credit. However, with investors fears about regulation, a double dip in housing, and a trading slowdown, outlooks offered by the banks may matter as much as results.
Some key themes for the quarter include: Credit, Rates, Fees, and Capital Building; TARP Raises.
On Credit, Goldman said with card delinquencies falling 10% in the quarter, and card charge-offs making up appox. 50% of the credit costs at JP Morgan (NYSE: JPM), Bank of America (NYSE: BAC) and C (NYSE: C), "provisions may fall faster than investors realize."
On Rates, Goldman said with rates down again, CD re-pricing continues with KeyCorp (NYSE: KEY) and Huntington Bancshares Inc. (Nasdaq: HBAN) offering the most leverage.
On Fees, Goldman said trading revenues will be down from 1Q. They said this is largely priced into the stocks, although dispersion of trading results is still a wild card. They said FX trading is one bright spit, which makes Northern Trust (NTRS) at compelling Buy.
On Capital Building; TARP Raises the firm said "capital will build with stronger banks likely shifting targets for dividends to 1Q11." Regionals still need to raise approx $20B to repay TARP, and capital raising may come after Q2 results. The $20B is a drop in the bucket compared to the $350B raised over the past 3 years, the firm notes.
The firm's favorite ideas into Q2 are: Conviction Buy List-rated JP Morgan (NYSE: JPM) and Bank of America (NYSE: BAC) and Buy-rated Citigroup (NYSE: C) on improving consumer credit; KeyCorp (NYSE: KEY) on better than expected net interest margin as CDs re-price; Northern Trust (Nasdaq: NTRS) on upside from FX trading.
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http://www.streetinsider.com/premium_content.php
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