JPMorgan unveils top bank picks after analyzing earnings results

Published Wed, Nov 1 201712:26 PM EDT

JPMorgan's research group shared its top large cap bank stock ideas in a note to clients Wednesday. "Divergence persisted into the third quarter among regionals with some banks continuing to deliver better results than others," wrote analyst Vivek Juneja. "Bank stocks have done well recently, especially money centers, on hopes for a more hawkish Fed (with likely a new head plus more), plus some upside from regulatory and tax reforms." The analyst gave his five key thoughts on the recent third-quarter results: "Earnings per share growth drivers will shift a little further towards share repurchases." "There are no signs of pick-up in loan growth into the forth quarter." "Banks are cutting costs more actively to offset weak revenue." "Banks are trying to grow fee revenues, but with mixed results." "Credit quality overall remains strong even with some seasoning of loans." Here are three overweight-rated stocks recommended by JPMorgan, along with current price targets. 1) Bank of America ( BAC ) "We continue to rate Bank of America Overweight relative to our universe due to the benefit from expense savings, potential for increased capital return, and higher interest rate sensitivity. BAC's normalized earnings should benefit from cost cuts, and interest rate hikes, plus any loosening of regulations." Juneja raised his December 2018 price target on Bank of America to $28.50 from $27.50. The new target is 4 percent higher than Tuesday's closing price. 2) Citigroup ( C ) "We rate Citigroup at Overweight relative to peers due to its large capital return potential plus some benefit from higher rates and lower regulation. We believe Citigroup has an attractive franchise with good long-term growth opportunities in emerging markets and should also have good capital return potential as more capital gets freed up and DTA gets utilized. In addition, Costco co-branding deal has gone better than expected and should begin to add to earnings." The analyst maintained his December 2018 price target of $78.50, which is 7 percent higher than Tuesday's close. 3) SunTrust ( STI ) "SunTrust's earnings should benefit from growing middle market investment banking franchise and improving efficiency ratio. We rate SunTrust Overweight relative to our coverage universe because we expect it to continue to successfully grow its investment banking business to drive revenue growth and manage expenses and efficiency better than peers. And acquisition risk is likely to be less than peers, in our view." Juneja reiterated his $64.50 December 2018 price target on the shares, 7 percent higher than Tuesday's close.

A Bank of America customer uses a bank card

Kelsey Kaspar | Bloomberg | Getty Images

JPMorgan's research group shared its top large cap bank stock ideas in a note to clients Wednesday.

"Divergence persisted into the third quarter among regionals with some banks continuing to deliver better results than others," wrote analyst Vivek Juneja. "Bank stocks have done well recently, especially money centers, on hopes for a more hawkish Fed (with likely a new head plus more), plus some upside from regulatory and tax reforms."

The analyst gave his five key thoughts on the recent third-quarter results:

"Earnings per share growth drivers will shift a little further towards share repurchases."
"There are no signs of pick-up in loan growth into the forth quarter."
"Banks are cutting costs more actively to offset weak revenue."
"Banks are trying to grow fee revenues, but with mixed results."
"Credit quality overall remains strong even with some seasoning of loans."

Here are three overweight-rated stocks recommended by JPMorgan, along with current price targets.