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Bank Earnings Will Triple in Next Few Years: Senior Analyst

JPMorgan beat consensus profit estimates in the fourth quarter, but revenue just missed analysts' forecasts and the bank's chief executive said the results fell short of potential. Al Villalon, senior financials analyst at First American Funds, and Anthony Polini, bank analyst at Raymond James, shared their insights on financials.

“It was a very encouraging quarter [for JPMorgan],” Pollini told CNBC.

“The quarter was very bullish as far as the credit quality outlook—it looks like the inflection point for credit quality for the industry is 1 or 2 quarters away, so we’ve certainly read the quarter as very bullish for the industry in general.”

Polini has“strong buy” ratings on JPMorgan and Bank of America and is bullish on the banks in general.

“When you look at the credit cycle for banks, it’s going to be like the economy—we’ve bottomed, but we’ll come off the bottom slowly,” he said.

“Same with the credit cycle turn—loan losses are high this year, they’ll be slightly lower than last year…providing some strong wind at their backs, especially in the second half of the year,” Polini said.

In the meantime, Villalon also said he is bullish on financials. He is seeing some positive credit quality development for the first time in over two years from JPMorgan.

“That makes us bullish on JPMorgan and we use that as a read-through for other banks within the financial sector,” he said. “We’re looking at earnings of these banks to triple over the next several years to normalize levels.”

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Disclosures:

Polini does not own shares of JPM or BAC.

Villalon's firm is active in JPM, BAC, CMA, FITB, RF, KEY. Villalon does not own shares of JPM.

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