Record deals and favorable credit market conditions helped offset modest loan growth at major U.S. banks, analysts say

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Analysts praised Bank of America’s lending growth and posted mostly positive comments on Wells Fargo and Morgan Stanley as Wall Street sifted through a flurry of big bank earnings updates this week.

Citigroup’s earnings, however, caused an analyst’s price drop.

The results of the Big Four banks did not appear to inspire major rises or falls in stocks a day after the release of their third quarter results, although analysts did adjust their profit targets in some cases.

Raymond James analyst Daniel Tamayo said that a key point from Bank of America’s BAC,
+ 3.01%
The third quarter results were loan growth over the past two quarters that started to show signs of increasing demand.

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The improved appeal efforts of trade relations officers and the growing demand for credit-fueled loan increases in the bank’s business unit, he said. Small business loans have also started to grow. Credit card volume is also expected to increase with an increase in seasonal activity in the fourth quarter.

Jefferies analyst Ken Usdin increased his 2022 profit estimate for Bank of America to $ 3.10 per share from $ 3 and raised his view on 2023 earnings to $ 3.45 from $ 3.30 . He maintained a holding rating on the company.

Usdin cited higher income and better credit, partially offset by higher costs. Jefferies also expects net interest income to increase slightly in the fourth quarter, “as higher loan balances, premium amortization benefits and the deployment of additional cash” offset lower revenue from the government PPP loan program.

Raymond James analyst David Long reiterated an outperformance rating on Wells Fargo WFC,
+ 6.50%
and said the decline in the company’s stock price on Thursday was “undeserved.”

He increased his 2022 profit target for Wells Fargo by 12 cents to $ 3.87 per share and increased his 2023 profit estimate by 12 cents per share to $ 4.22 to reflect the bank’s positive updates, which is valued at a discount compared to its peers.

“The quarter was marked by modest loan growth, favorable credit indicators and an improving basic spending base,” he said. “We remain bullish on WFC stocks as we continue to believe profitability is set to improve, driven by acceleration in base expense-based revenues, continued expense rationalization and the return of excess capital to shareholders through share buybacks. “

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Jefferies analyst Daniel T. Fannon reiterated a buy note on Morgan Stanley MS,
+1.84%
and said the bank’s investment banking activities are fueling its results. Fannon increased his estimate of fourth quarter earnings for Morgan Stanley to $ 1.95 per share from $ 1.60 per share and raised his view on 2022 earnings to $ 7.90 per share from 7.41 $ per share. He also raised the company’s price target for Morgan Stanley to $ 121 per share, from $ 119 per share.

“These changes primarily reflect the continued strength of the investment bank in the short to medium term,” Fannon said. “Growth trends also remain strong in wealth management, with new net assets setting a record over the period. “

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Morgan Stanley’s investment bank revenue of $ 2.8 billion marks the fourth such record in the past six quarters, he said.

“As the debate over the sustainability of investment banking fee levels continues, management has described current investment banking pipelines as” healthy in all sectors and regions “and expects the ‘activity “continues on the current path”, “said Fannon.

Kenneth Leon, analyst at CFRA Research, reiterated a hold note on Citigroup C,
+ 2.25%
and lowered its price target from $ 4 per share to $ 76 per share. But he increased his 2021 profit estimate for the bank by 30 cents per share to $ 10.35 per share, but keeps his 2022 estimate unchanged at $ 8.20 per share.

Citigroup faces execution risk in downsizing its consumer banking unit to four markets in Asia and Europe, Middle East and Africa in Singapore, Hong Kong, Arab Emirates United and London, as well as economic risks in Latin America, he said. Global card revenue fell 3%, while its peers posted growth.


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