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Wells Fargo is faltering, but banks are doing well overall, analysts say

Wells Fargo's newly appointed CEO Tim Sloan is handling the fallout well, but the bank's recent scandal is not its only hurdle, analyst Gerard Cassidy said Friday.

Wells Fargo, JPMorgan and Citi all released earnings Friday morning, with Wells Fargo underperforming relative to its two competitors.

Cassidy, the managing director of RBC Capital Markets' equity research division, said the primary reason for the bank's underperformance was that JPMorgan and Citi's capital markets businesses were extremely strong.

"In particular, the debt underwriting and the FICC trading areas were extremely strong for both JPMorgan and CitiGroup, and of course, Wells Fargo is not in those businesses," Cassidy told CNBC's "Squawk on the Street" on Friday.

FICC trading refers to fixed income, currencies and commodities trading.

Cassidy commented on Sloan's comments Friday morning regarding the future of Wells Fargo's business, calling the tone of the comments "very positive" and "contrite" and saying that the company is "going in the right direction under this new leadership."

While Cassidy said it was difficult to predict what the eventual cost of Wells Fargo's malpractices will be, he said the bank is likely to begin building reserves for payouts over the coming months.


Analyst Jeffery Harte echoed Cassidy's point about Citi and JPMorgan beating expectations, saying the third quarter has been a surprisingly positive one for bank earnings.

"You look at the big [banks]: They're growing loans, they're getting more efficient, capital markets has become a tailwind as opposed to a drag, credit quality is remaining pretty good," Harte told CNBC's "Fast Money Halftime Report" on Friday.

What Harte is waiting for next is "what's going to give us the next kind of kick up as opposed to a kick down," he said.

The picture Harte sees, with upticks in inflation and the Consumer Price Index (CPI), could suggest higher rates in the near future, which would certainly benefit the banks, he said, though he would not recommend speculating.

"It's tough to make your money betting on what the Fed's going to do or what interest rates are going to do, because it's kind of been surprising people forever," the analyst said.

What he would bet on is Citi, which Harte predicted will benefit from expanding its core international consumer base in the near future, calling the move into non-U.S. areas of business "something the market will look sustainably on."