Financials

Report by Portales Partners

The fundamental setup for US bank stocks in 2026 remains attractive, with mid-teens EPS growth driven by improving NII, benign credit costs, positive operating leverage and continued buybacks. Deregulation is a key secular tailwind, already contributing to a powerful 2025 re-rating, but valuations remain cautious at roughly 55% of the market multiple. While early-2026 performance may favour the investment banks, Charles Peabody would not be surprised if the stocks of JPMorgan Chase, Morgan Stanley and Goldman Sachs peaked in 1Q26 as he expects that to be the peak Y/Y revenue and PPNR momentum for these companies. He sees NII as a more durable revenue source throughout 2026, which favours the regional bank stocks. Charles sees the greatest relative upside in Citigroup, M&T Bank, US Bancorp and PNC Financial.

Financials

Report by Portales Partners

After earnings beats from JPMorgan, Wells Fargo, Goldman Sachs, Bank of America, PNC as well as Citi why were all the other banks up significantly and Citi was down 5%? Charles Peabody discusses asset caps (Citi is already shrinking itself by shedding its global consumer bank, so an asset cap makes no sense whatsoever) and a probable delay in the Banamex IPO. He argues Citi is one of the best stories in large cap financials and is the only company able to repurchase large amounts of its common stock at a substantial discount to TBV. Expectations are low, the regulatory pressure is high and management is doing all the right things.

Financials

Report by Portales Partners

Bank stocks sold off on multi-decade highs in long term interest rates last week, while investors prepare for a host of key events over the coming months. Charles Peabody believes banks could rally on 3Q23 earnings results as investors see some relief from regulatory rulings and deposit betas while AOCI and credit deterioration remain front of mind. However, the fundamental trends for banks will continue to deteriorate into 1H24. Markets are differentiating between banks with the capital, liquidity and funding to take advantage of opportunities - and those without. Charles favours JPMorgan, Wells Fargo and PNC, while shunning US Bancorp and Truist Financial.

Financials

Report by Portales Partners

Charles Peabody believes the banks conducted themselves well in fairly harsh stress tests that indicate an excess of capital in the sector. If regulators don’t panic, the path from crisis to normalisation can proceed even if we confront a mild recession. Charles favours the fundamental strength of JPMorgan but notes the underappreciated capital power of PNC and Wells Fargo. He is attracted to the adjusted yields of Citizens Financial and M&T while commenting that Morgan Stanley and Goldman Sachs also fare well in this category.

Financials

Report by Portales Partners

Charles Peabody recommends fading capital markets names as the outlook is based on hope but continues to be bullish banks (as he has done since the summer lows) as NII forecasts are restrained by fear. The most predicted recession in history is being pushed out and bank prices are responding to the powerful revenues and stable asset quality on display, buttressed by the resumption of stock buybacks. Charles continues to favour Wells Fargo, JPMorgan, PNC and Truist Financial Corp.

Report by Portales Partners

Pretax, pre-provision net revenues, the most powerful dynamic driving bank stocks, are projected to grow 7% in Q3’22, 15% in Q4’22, and 31% in Q1’23. These revenue and net income comparisons improve from near last in early 2022 to near best in 2023 for all S&P sectors. Obviously, top line revenue growth is almost assured given the shift in the yield curve, yet not so obvious is that credit quality appears quite stable through year end. When markets conclude that a recession is not inevitable, or that credit costs are manageable, Charles Peabody believes that bank stocks should respond quite favourably. Top picks include PNC, Wells Fargo, JPMorgan and Truist.

Financials

Report by Paragon Intel

Takeover looming? Paragon’s JetTrack platform flags interesting flight activity from PNC to FITB’s HQ - PNC flew to Cincinnati on June 15, for the first time since December 13, 2019. It has flown back 5x since then. Following the recent US Bancorp deal, FITB is the last of the five largest regional banks by assets to receive significant acquisition interest in the past two years.