Banking & Finance

Barclays Sees Higher Upside and Solid Value in Major Banks

There may be more upside ahead in the big banks. This week brought a research report from Barclays showing that the big banks are more attractive now than they were in the prior week. While the banks were not given formal analyst upgrades, the reality is that some of the price target hikes were rather impressive over America’s too-big-to-fail banks. Some of the analyst targets are just shy of the highest official analyst price targets out there.

24/7 Wall St. has included the analyst call itself via the rating and the price target, and we included what this means for implied upside based on Friday’s closing price and then given dividend data for a total return opportunity perspective. Also included from the late-week Barclays review is the consensus analyst price target, a 52-week range of each bank’s stock and additional color if applicable.

Jason Goldberg, the Barclays analyst behind the call, was positive on earnings and net interest margins in general. Expenses are also becoming more in line with expectations and are expected to remain that way.

Bank of America Corp. (NYSE: BAC) was maintained as Equal Weight but the price target was raised to $20 from $19 in the Barclays call. We recently featured the bank as one of only seven big banks still trading under book value. Trading at $17.87 before the call, Friday’s closing price of $17.75 leaves an implied 13% upside, before considering its 1.1% yield now and how much Bank of America will get to raise its dividend soon. The stock has a consensus price target from Thomson Reuters of $19.22 and 52-week trading range of $14.97 to $18.48. While the highest official price target is only $1.00 higher than the Barclays call, we would remind readers that another analyst recently laid out how the shares could double over the next four years or so.

Citigroup Inc. (NYSE: C) was maintained as Overweight, but the price target was raised to $70 at Barclays. With a $57.91 closing price on Friday, almost $1.00 lower than when the call was made, this leaves implied upside of 21%, before thinking about how much Citi will be allowed to raise its dividend ahead. Citigroup has a consensus analyst price target of $65.96 and a 52-week range of $46.60 to $60.95. It was also in out look at the big banks trading under book value, and its highest price target is $74.00.

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JPMorgan Chase & Co. (NYSE: JPM) was maintained as Overweight in the Barclays call, but the price target was raised to $79 from $73. That $79 target is $2 shy of the street-high price target. Shares of JPMorgan were trading at $68.73 ahead of the call, and Friday’s closing price of $68.05 leaves implied upside of 16%, before considering its 2.6% dividend yield. JPMorgan has a consensus target price of $74.66 and a 52-week range of $54.26 to $70.61.

Wells Fargo & Co. (NYSE: WFC) was also maintained as Overweight by Barclays, and its target price was raised to $67 from $62. The highest price target is only now $2.00 higher than the Barclays target. Wells Fargo was trading at $57.65 before the call and closed on Friday at $57.47. The new close leaves implied upside of 8%, before considering its 2.6% dividend yield. Wells Fargo has a consensus price target of $59.66 and a 52-week range of $46.44 to $58.77.

Goldman Sachs Group Inc. (NYSE: GS) is not really a bank, but Barclays still classifies it in the same calls due to the bank holding company classification. Goldman Sachs was kept at Equal Weight, but the target price was raised to $230 from $225. Goldman Sachs shares closed at $205.70, and they have a consensus price target of $219.55 and a 52-week range of $168.68 to $218.77.

Morgan Stanley (NYSE: MS), also as a technical bank holding company classification, was maintained as Equal Weight and the target price was raised to $44 from $43. Morgan Stanley shares end the week at $38.58. The bulge bracket brokerage firm has a consensus price target of $41.83 and a 52-week range of $31.12 to $41.04.

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Sector calls of this nature often get lost in the shuffle during the week. They are not exactly formal analyst upgrades, but this shows above-market expected returns if the price targets pan out.


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