With bank earning season about to hit, FBR said their top recommendations for large caps are Bank of America (NYSE:BAC), PNC Financial (NYSE:PNC), JPMorgan (NYSE:JPM) and U.S. Bancorp (NYSE:USB).
Among regional banks they like Signature Bank (Nasdaq:SBNY) and National Penn Bancshares (Nasdaq:NPBC).
FBR said, "Bank earnings season kicks off with JP Morgan Chase (Outperform) reporting 4Q10 results on January 14. We expect that quarterly EPS will likely be in line to slightly better than expectations due to decent reserve releases, good mortgage banking earnings from historically low interest rates in the front end of the quarter, and better-than-expected NIM due to an increase in rates in the back half of the quarter. However, we recommend investors tread carefully going into the quarter given: (1) strong recent outperformance from the sector, and (2) the potential for cautious forecasts from management commentary could temper expectations. We favor the larger banks due to better efficiency and more diversified revenue sources; we are more cautious on regional banks, particularly those struggling to earn their cost of capital and relatively higher exposure to commercial real estate. We recommend PNC Financial Services Group (Outperform), JPM, U.S. Bancorp (Outperform), and Bank of America (Outperform), and note that there are company-specific opportunities among the regional banks, such as Signature Bank ( Outperform) and National Penn Bancshares (Outperform). Outside of improving credit trends, we are cautious on fundamental trends for the group, given our expectation for weak loan growth, adverse asset mix shifts, and lower mortgage banking revenues, which all are risks to 2011 earnings."
"Into 4Q10 results, we favor the large banks with diversified revenues, efficient operations, large reserves, and exposure to mortgage banking. We recommend PNC, JPM, USB and BAC, along with SBNY and NPBC among the regionals, but we remain cautious on less-efficient regional banks."
JPMorgan was trading at $43.26, down $0.38, or 0.87 percent, as of 11:33 AM EST. Bank of America was at $14.27, up $0.02, or 0.14 percent. PNC was at $61.42, down $0.52, or 0.84 percent. U.S. Bancorp was at $26.04, down $0.05, or 0.19 percent.
Monday, January 10, 2011
Bank of America (NYSE:BAC), PNC Financial (NYSE:PNC), JPMorgan (NYSE:JPM), U.S. Bancorp (NYSE:USB) FBR's Top Banking Picks
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