Strong Investment Banking But Weak Trading: Strategist
David Konrad, head of large-cap banking research at Keefe, Bruyette and Woods, told CNBC he expects a tough trading quarter in the months to come.
"We are expecting probably about an eight to 10 percent decline in revenues, as the earnings reports start on Thursday, that is largely impacted by the trading numbers," Konrad said.
While the market's pricing in earnings expectations, "financials have been under pressure for a few days on the anticipation that this quarter is going to be challenging," Konrad added.
He told CNBC that the yield curve environment is going to put some pressure on net interest margins, with stagnant trading in the markets for the quarter, alluding to troubles in the Greek sovereign debt crisis.
Konrad said, "It is going to look a lot like the fourth quarter of last year, where we had strong investment banking and weak trading."
"In this downturn we always look to the quality [stock] names as an entry point," he added.
Konrad's Favorite Stock Pick:
"Despite distressed numbers they [JPMorgan] still are expecting about a 14 to 15 percent return on tangible capital for the company."
"Certainly [Greek crisis] is a concern but I think we're looking at short term trading lines and derivative exposures with some larger counter-parties in Europe. Whether or not they need to raise capital or not, I'm not sure of... but I think they are going to be pretty well protected from a counter-party risk," Konrad said.
Konrad told CNBC that he believes credit quality will continue to be strong for banks in the fall months to come.
Konrad's Other Stock Pick:
- Goldman Sachs
CNBC Data Pages:
More Companies in the News:
- Alcoa Q2 Profit Jumps on Metal Prices
- BP Wants to Limit Gulf Oil Spill Claims
- Auto Sales Climb In June as Gas Prices Continue to Fall
David Konrad owns shares of the companies mentioned above.
Keefe, Bruyette and Woods expects to receive or intends to seek compensation for investment banking services from JPMorgan Chase in the next three months.