Nomura Securities on U.S. Banks: Q3 Halftime: Gimme Some Growth
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13 Buy, 23 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 8 | Down: 11 | New: 19
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Nomura Securities on U.S. Banks: Q3 Halftime: Gimme Some Growth
Nomura analyst, Brian Foran, said, "As we near the halfway point for earnings, the core issue in the quarter is the struggle to grow revenue, with an assist from concerns that the second derivative of credit has turned. Regionals reporting in the days ahead should show less net interest margin pressure than big banks (down
10bp), but admittedly this is less about growth and more about owning less securities and having more cost of fund reduction opportunities."
Company-specific tidbits:
"Figuring out single stocks seems a bit futile when the sector has averaged +/- 3% moves per day over the past three months. That said, looking ahead, we note 1) mortgage rate lock vs. funding revenue booking is a key timing divide this quarter: SunTrust (NYSE: STI), BB&T (NYSE: BBT), U.S. Bank (NYSE: USB), PNC Financial (NYSE: PNC) all book at lock while Fifth Third (Nasdaq: FITB), Huntington (Nasdaq: HBAN), Regions (NYSE: RF) (and of course Wells Fargo (NYSE: WFC)) book at funding— we continue to like FITB, but don't be surprised if its mortgage strength comes mostly in 4Q as a result; 2) Comerica (NYSE: CMA) should have nice loan growth on the back of mortgage warehouse balance growth akin to First Horizon (NYSE: FHN), but the jury is out on C&I yields as Wells and BofA (NYSE: BAC) were surprisingly weak; 3) Southeast credit trends remain a sore spot and FHN's NPA sale below its marks didn't help sentiment...even though the actual loans sold were in CA, AZ, WA and OR from the national book; 4) a lot of investors are nervous on USB after seeing the outsized WFC reaction to a so-so quarter— USB feels crowded, but the company said it is "flirting with record revenue," so it seems the risk of a top-line
miss like Wells’s is lower; 5) our CMBS analyst flagged multifamily prepayments slowed this quarter, this could hurt City National's (NYSE: CYN) accretable yield."
Nomura analyst, Brian Foran, said, "As we near the halfway point for earnings, the core issue in the quarter is the struggle to grow revenue, with an assist from concerns that the second derivative of credit has turned. Regionals reporting in the days ahead should show less net interest margin pressure than big banks (down
10bp), but admittedly this is less about growth and more about owning less securities and having more cost of fund reduction opportunities."
Company-specific tidbits:
"Figuring out single stocks seems a bit futile when the sector has averaged +/- 3% moves per day over the past three months. That said, looking ahead, we note 1) mortgage rate lock vs. funding revenue booking is a key timing divide this quarter: SunTrust (NYSE: STI), BB&T (NYSE: BBT), U.S. Bank (NYSE: USB), PNC Financial (NYSE: PNC) all book at lock while Fifth Third (Nasdaq: FITB), Huntington (Nasdaq: HBAN), Regions (NYSE: RF) (and of course Wells Fargo (NYSE: WFC)) book at funding— we continue to like FITB, but don't be surprised if its mortgage strength comes mostly in 4Q as a result; 2) Comerica (NYSE: CMA) should have nice loan growth on the back of mortgage warehouse balance growth akin to First Horizon (NYSE: FHN), but the jury is out on C&I yields as Wells and BofA (NYSE: BAC) were surprisingly weak; 3) Southeast credit trends remain a sore spot and FHN's NPA sale below its marks didn't help sentiment...even though the actual loans sold were in CA, AZ, WA and OR from the national book; 4) a lot of investors are nervous on USB after seeing the outsized WFC reaction to a so-so quarter— USB feels crowded, but the company said it is "flirting with record revenue," so it seems the risk of a top-line
miss like Wells’s is lower; 5) our CMBS analyst flagged multifamily prepayments slowed this quarter, this could hurt City National's (NYSE: CYN) accretable yield."
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