Sundry Photography/iStock Editorial via Getty Images Expecting the Federal Reserve to boost interest rates five times this year starting in March, Jefferies analysts Ken Usdin and Casey Haire downgrade JPMorgan (NYSE:JPM) and U.S. Bancorp (NYSE:USB) to Hold from Buy and upgrade Comerica (NYSE:CMA) and Zions Bancorporation (NASDAQ:ZION)
to Buy from Hold. JPMorgan (JPM) and U.S. Bancorp (USB) have "fewer meaningful EPS upside drivers in sight," while Comerica (CMA) and Zions (ZION) are seen as the top beneficiaries of rising rates, the analysts wrote in a note to clients. JPMorgan's (JPM) has limited upside due to its "still premium multiple" after its cost-related EPS reset, and tough fee comparisons. The bank is well-positioned for core net interest income growth, "but trading-related NII will fade with higher rates," Usdin and Haire said. For U.S. Bancorp (USB), "we see less upside from higher rates (due to a historically higher deposit beta) and fewer buybacks vs. most peers, with slower-than-expected payments growth a potential fee challenge." For the upgrades, both Comerica (CMA) and Zions (ZION) "have a good formula of NII growth from rising rates, exposure to C&I (commercial and industrial) loan growth, and sizable excess liquidity, with fewer drags from tough fee comps and less earnings impact from future loss normalization," the two analysts wrote. In premarket trading, JPMorgan (JPM) stock slips 0.9%, U.S. Bancorp (USB) edges down 0.1%, Comerica (CMA) rises 0.9%, and Zions (ZION) is unchanged. By Quant rating, only Comerica (CMA) has a Strong Buy, with JPM, USB and ZION each with a Hold rating as seen in peer comparison tab. Click here for a chart showing total returns over the past year for the four banks. SA contributor Librarian Capital looks at whether JPMorgan (JPM) is a Buy or Sell after its Q4 earnings.
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