While the earnings season is set to wind down after what was a very solid quarter, one sector has been weak since March, and despite posting some solid results, has only partially recovered. JPMorgan is out with a new research report, and its analysts feel there is some solid value for patient investors. The report noted this:
As we look ahead into the second quarter, we expect large bank earnings to remain moderate and credit quality overall to remain good. Large bank stocks are attractively valued relative to the market, trading closer to the low end of the historical range of relative P/E multiples to the S&P 500 seen during periods of economic recovery.
With credit quality at the top companies in solid shape, and deposits rising at a faster than expected rate, the overall outlook appears good. While investment banking levels were softer in April than March in some areas, the analysts see the hiccup as seasonal and partly due to some uncertainty. They expect the rest of the quarter to improve.
These five stocks are rated Overweight at JPMorgan.
Bank of America
The company posted solid first-quarter results, and it expects a significant increase in net interest income for the current quarter. Bank of America Corp. (NYSE: BAC) is a ubiquitous presence in the United States, providing various banking and financial products and services for individual consumers, small and middle market businesses, institutional investors, corporations and governments in the United States and internationally. It operates some 5,100 banking centers, 16,300 ATMs, call centers, online and a mobile banking platform.
The company is one of the larger lenders to the oil and gas industry, and it told analysts earlier this year that it had set aside more money for coverage of loans to the industry that may go bad. Overall credit quality remained strong, while consumer portfolios continued to improve and commercial portfolios remained stable with energy improving.
Bank of America investors are paid a small 1.3% dividend. The JPMorgan price target for the stock is $25, and the Wall Street consensus target is $25.39. The stock closed most recently at $23.61 per share.
This top bank is trading at the same level it was in the summer of 2015. Citigroup Inc. (NYSE: C) has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. It provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services and wealth management.
Trading at a still very cheap 10 times estimated 2018 earnings, the bank looks very reasonable in what is becoming a pricey stock market. A continuing stock buyback program is a big positive. The company’s institutional clients group appeared to be holding its ground last quarter.
Citigroup investors are paid a 1.08% dividend. JPMorgan has a $65 price target for the shares. The posted consensus price objective is $64.74, and the shares closed on Monday at $59.46 apiece.