Wells Fargo & Co recently pointed out in an analysis report that the performance of large US banks in the second quarter of this year proves that the industry is at a turning point after years. The bank's analyst Mike Mayo said that factors such as central bank policies, capital markets, costs, crediting, and capital are favorably contributing to the industry's shift to positive growth. Mayo is bullish on Citigroup, Bank of America and JPMorgan.
In a recent analysis report, Wells Fargo & Co pointed out that the US banking industry is at a turning point this month, as indicated by the second quarter performance reports released by large banks. They are transitioning from negative growth to positive growth in terms of revenue growth, operational leverage, and EPS growth.
Fuguo Bank analyst Mike Mayo wrote in a recent report to clients that factors such as central bank policies, capital markets, costs, crediting, and capital are having a positive effect on the large bank stocks. He pointed out that these bullish factors include the Fed's decisions leading to changes in net interest income in the second quarter and in the future; capital markets showing the best improvement in three years; cost showing a slight positive operating leverage in the second quarter; credit losses only increasing by 1 basis point compared to the previous quarter; and higher capital levels leading to increased dividends and buybacks. At the same time, Mayo believes that current interest rates are expected to slide off their peak, and there are signs of economic recession and a relaxation of regulation. Mike Mayo is bullish on some bank stocks, with top picks including Citigroup, Bank of America, and JPMorgan, followed by US Bancorp, PNC Financial Services, and State Street.
He estimates that by the fourth quarter of 2025, net interest income for Bank of America will increase from $13.9 billion in the second quarter of 2009 to $15.1 billion and will reach $62 billion in 2026. For JPMorgan, considering returns, income, and risk, the core ROTCE is at 20%. In addition, the bank's income will continue to exceed that of its peers. Although JPMorgan has claimed to be overearning and faced tail risks, the bank repurchased $5 billion in stocks in the second quarter of 2024, outperforming its peers and exceeding the upper limit of market expectations.
For Citigroup, Mayo said, "The bank's ROTCE guidance for 2025/26 gives us more confidence, and we expect ROTCE of over 10% to be achievable by 2026, which would put Citigroup's tangible book value at $110 in 2026."
Mayo is bullish on bank stocks.
Mayo is bullish on some bank stocks, with their top picks including$Citigroup (C.US)$,$Bank of America (BAC.US)$And.$JPMorgan (JPM.US)$followed by$U.S. Bancorp (USB.US)$,$PNC Financial Services (PNC.US)$And.$State Street (STT.US)$.
Regarding Citigroup, Mayo said, "The bank's ROTCE guidance for 2025/26 gives us more confidence, and we expect ROTCE of over 10% to be achievable by 2026, which would put Citigroup's tangible book value at $110 in 2026."
He estimates that by the fourth quarter of 2025, net interest income for Bank of America will increase from $13.9 billion in the second quarter of 2009 to $15.1 billion and will reach $62 billion in 2026.
For JPMorgan, considering returns, income, and risk, the core ROTCE is at 20%. In addition, the bank's income will continue to exceed that of its peers. Although JPMorgan has claimed to be overearning and faced tail risks, the bank repurchased $5 billion in stocks in the second quarter of 2024, outperforming its peers and exceeding the upper limit of market expectations.
Editor/ping