Here’s How Analysts Are Rating Big Banks
With fourth-quarter earnings out and the majority of financial crisis-era lawsuits in the past, analysts have begun to reassess several of the United States’ largest financial institutions.
JPMorgan Chase (NYSE:JPM): Current Price $47.01
In some respects JPMorgan Chase had a rough 2012. Since August the bank’s stock has trailed behind global banks by 30 percent, and even more concerning it chalked up a $6.2 billion trading loss earlier in the year and was fined $4.3 billion by federal and state prosecutors for mortgage-related abuses. However, despite these setbacks, JPMorgan was able to post record profits for 2012, generating $21.3 billion in net income last year.
These earnings drew the notice of analysts at Deutsche Bank, as did the bank’s diminishing mortgage business. The team of analysts led by Matthew O’Connor wrote in a research note seen by Bloomberg that JPMorgan’s annual operating expenses could drop by as much as $5 billion in the next few years, partly because its mortgage servicing costs will decrease.
O’Connor upgraded the shares of the financial institution to buy from hold and increased the 12-month price target to $53 from $48. “We think JPM is the best-positioned market-sensitive bank for a pickup in consumer loan growth,” he wrote.
Goldman Sachs (NYSE:GS): Current Price $144.56
Despite reporting that fourth-quarter earnings almost tripled, Deutsche Bank’s analysts see the 48 percent that its stock has gained since August as a sign that the financial firm does not have much more room to grow. The stock is trading inline with its 12-month price target of $144, and O’Connor does not believe that Goldman Sachs has the same cost-saving potential as JPMorgan.
Bank of America (NYSE:BAC): Current Price $11.60
While Bank of America was not part of Deutsche Bank’s series of rating changes, Chief Executive Officer Brian Moynihan gave his own assessment of the the bank’s future potential on Thursday. Speaking to CNBC’s Maria Bartiromo at the World Economic Forum in Davos, Switzerland, Moynihan explained how downsizing its investment banking unit and “cleaning up” its mortgage business has given the bank “great earnings power.” It also helps that mortgage-related financial impacts are largely behind the bank; in the last quarter, Bank of America took a $2.7 billion hit to earnings, due in part to the huge settlement with Fannie Mae.
The bank’s stock has risen 100 percent in the last year and 30 percent over the past three months.
Investor Insight: The Fed’s Balance Sheet: $1 Trillion…$2 Trillion…$3 Trillion.