Nomura Securities on U.S. Banks: Analysis on Banks in a Low-Rate Environment

Nomura Securities on U.S. Banks: Analysis on Banks in a Low-Rate Environment by Brian Foran

Foran said, "Low rates are not good for banks. Neither is a flat curve. Thus, the Fed’s renewed efforts to make rates lower and the curve flatter resulted in selling of bank stocks. From here, the challenge for the industry is how to mitigate the pain – we see three levers the banks will continue to pull: 1) deposit rates go to zero, 2) wider mortgage gain on sale, and 3) exploring new ways to generate yield. We recently upgraded Fifth Third (Nasdaq: FITB) to Buy, although Operation Twist was not part of the thesis. We continue to see value, with the stock trading at 0.9x tangible book despite producing a 14% return on tangible common equity, which we view as sustainable."

Other sector stocks include: JPMorgan (NYSE: JPM), PNC (NYSE: PNC), Citi (NYSE: C), Wells Fargo (NYSE: WFC), BofA (NYSE: BAC), Comerica (NYSE: CMA), U.S. Bank (NYSE: USB), Bank of NY (NYSE: BK), BB&T (NYSE: BBT), Northern Trust (Nasdaq: NTRS) & State Street (NYSE: STT)

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