Jefferies analysts on Tuesday said Morgan Stanley, Goldman Sachs Group Inc., Bank of New York Mellon Corp. and State Street Corp. remain more attractive than other big banks ahead of first-quarter earnings season.
Jefferies analysts said they prefer Goldman Sachs
GS,
+0.74%
and Morgan Stanley
MS,
+1.30%,
as well as BNY Mellon
BK,
+1.13%
and State Street
STT,
+1.62%,
as ways to have exposure to any potential positive around deposit flows to larger banks. Those banks also offer less net interest income risk and better capital positioning, the analysts said.
The research update from Jefferies came as JPMorgan Chase & Co.
JPM,
+0.49%,
Wells Fargo & Co.
WFC,
+1.92%
and Citigroup Inc.
C,
+1.46%
are due to kick off the first-quarter earnings reports from the big banks on Friday.
“The bank stock narrative remains challenging, but we expect some less-bad deposit anecdotes through [first-quarter] earnings that will hopefully ease worst-case concerns,” Jefferies analyst Ken Usdin said in a research note. “Still, the path for the economy, regulatory changes, and June stress tests weigh on sentiment/multiples.”
Jefferies reiterated its buy ratings on Goldman, Morgan Stanley, State Street and BNY Mellon.
The big trust banks State Street and BNY Mellon will benefit from servicing and management fees as a relatively protected source of revenue, along with more limited credit risk and healthy balance sheets, analysts said.
And with large wealth-management and brokerage revenue, Morgan Stanley and Goldman may avoid the potential negative impact on net interest income from loans in the banking sector. The two marquee investment banks also offer stable preprovision net revenue, minimal credit risk and strong capital bases, analysts said.
Jefferies also reiterated its hold rating on Bank of America Corp.
BAC,
+2.76%
and cut the stock’s price target by 9% to $30 a share.
Jefferies reiterated a hold rating on Citigroup and hiked its price target by 9% to $49 a share.
Jefferies repeated its hold rating on JPMorgan Chase and cut its price target by 16% to $124 a share.
It cut its price target on Wells Fargo by 22% to $36 a share and reiterated its hold rating on the stock.
Jefferies analysts also upgraded New York Community Bancorp Inc.
NYCB,
+3.07%
to buy from hold amid the challenging environment for banks in the past month after the collapse of Silicon Valley Bank and Signature Bank of New York.
Analyst Casey Haire said Jefferies likes NYCB’s balance-sheet positioning given dramatic improvement in the bank’s liquidity profile from its pending acquisition of Signature Bank assets.
The Federal Deposit Insurance Corp.-brokered acquisition of Signature Bank will also provide NYCB with “increased scale and diversification,” Haire said.
Jefferies expects the bank, currently valued at a discount to its peers, to “close the multiple gap.” Jefferies also highlighted the bank’s expected dividend yield of about 8%, which it described as “attractive.”
Also read: Loan growth, lower margins cloud the skies over big banks: analyst
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