Caixin News Agency, July 22- Fuguo Bank recently pointed out in an analysis report that the second quarter performance reports released by large US banks this month indicate that the industry is at a turning point for many years. From the perspective of revenue growth, operational leverage, and earnings per share growth, they are all shifting from negative growth to positive growth.
Rich Country analyst Mike Mayo wrote in a recent report to clients that factors such as central bank policies, capital markets, costs, credit, and capital are positively stimulating large bank stocks.
He pointed out that these positive factors include the Federal Reserve's decisions leading to changes in net interest income for the second quarter and the future; The capital market has shown the best improvement in three years; The operating leverage for the second quarter of the cost display is slightly positive; Credit losses increased by only 1 basis point compared to the previous period; The rise in capital levels has led to an increase in dividends and repurchases.
Meanwhile, Mayo also believes that current interest rates are expected to fall from their peak, and there are signs of economic recession and a weakening trend in regulatory efforts.
Optimistic about bank stocks
Mayo is optimistic about some banking stocks, with Citigroup, Bank of America, and JPMorgan Chase being the top choices, followed by United Bank of America, PNC Financial Corporation, and State Street Bank.
For Citigroup, Mayo believes that "the bank's 2025/26 return on tangible common stock equity (ROTCE) guidance gives us more confidence that a ROTCE of over 10% is achievable by 2026. If so, Citigroup's tangible book value should reach $110 by 2026
Mayo commented on Bank of America, "We estimate that net interest income will increase from $13.9 billion in Q2 2009 to $15.1 billion by Q4 2025, and reach $62 billion for the full year of 2026
As for JPMorgan Chase, Mayo pointed out that considering returns, revenue, and risk, the bank's core ROTCE is at 20%. In addition, the bank's revenue will continue to exceed that of its peers. Although JPMorgan Chase stated that it had excess profits and faced tail risks, the bank repurchased $5 billion worth of stocks in the second quarter of 2024, outperforming its peers and exceeding market expectations.