Banking, finance, and taxes

3 Banks Called to Outperform After Fed Stress Tests (CCAR)

Jon C. Ogg

Published: May 23, 2016 10:10 am

Last Updated: January 13, 2020 7:42 am

It may be the time ahead of the summer doldrums, and you may have heard “Sell in May and go away,” but investors and traders alike are looking for opportunities here. One upcoming event is the Federal Reserve’s Comprehensive Capital Analysis and Review (CCAR), and the team at Merrill Lynch is telling its customers that three banks are expected to Outperform after the CCAR in June.

What is interesting about this call is not just the names, but perhaps why. And interestingly enough, due to research conflicts, the firm could not name Bank of America Corp. (NYSE: BAC) in the list. For that matter, the research department might not have named Bank of America as one of the top names even if it could cover it.

The Merrill Lynch team, led by Erika Najarian in this sector call, is now expecting the market to differentiate between the top and bottom performers following the CCAR stress test results in June. Their report said that the top two groups outperformed the bottom performers by an average of 3.8% after a month post-CCAR.

Citigroup Inc. (NYSE: C) has a Buy rating and the firm sees a $59 price objective (versus a $45.06 prior close). It has a consensus analyst price target of $56.42 and a 52-week trading range of $34.52 to $60.95. Merrill Lynch sees Citi doing $9 billion in buybacks.

JPMorgan Chase & Co. (NYSE: JPM) is rated as Buy and the firm sees a $72 price objective (versus a $63.39 close). The consensus price target is $70.78, and the 52-week range is $50.07 to $70.61. The firm talked up JPMorgan’s recent dividend hike of 9%.

SunTrust Banks Inc. (NYSE: STI) has a Buy rating, and the firm sees a $44 price objective (versus a $42.62 close). The consensus price target is $44.68. The 52-week range of $31.07 is $45.84. SunTrust is projected to deliver about $850 million in buybacks this year. Just last week it was named by Merrill Lynch as being under-owned and not reflecting the strong start to 2016.

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