美国大型银行业Q1盈利预览

1、Large Cap Banks5April2019Americas/United EquityResearch Large CapBanksResearchAnalystsSusan RothKatzke212 3251237 HYPERLINK mailto:susan.katzke susan.katzkeAdam Krasner,CFA212 3257116 HYPERLINK mailto:adam.krasner Gerard Padilla212 3253579 HYPERLINK mailto:gerard.padilla 1Q19 Earnings PreviewEARNING

2、SEARNINGSThis Is Late Cycle A Little Less of Just About EverythingThe CS Large Cap Bank group will begin reporting first quarter earnings on Friday morning, April 12, with JPMorgan, Wells Fargo and PNC weighing in first. What to expect With less macro and market support, slower revenue growth is to

3、be expected; operating leverage, low credit costs and share repurchase are driving EPS growth. All in, we forecast 2% yr/yr EPS growth with a 14% average ROTE. More important is the forward look Earnings growth will remain closely tied to GDP growth, market health and competitive position; share pri

4、ce performance will tie to valuation (how much risk is discounted) and investor confidence in the cyclical path.Large Cap Banks 1Q19 EPS expected to increase 2% year/year supported by a 4% share count reduction. To be sure, the averages are dragged down by those banks more reliant on the markets. Ou

5、r universal banks are expected to report EPS +3% yr/yr and +5% qtr/qtr; with less of a market-related revenue impact, our super-regional banks are expected to put up +6% yr/yr and -5% qtr/qtr EPS growth; the trust banks are expected to generate -12% yr/yr and -10% qtr/qtr EPScomparisons.Flattish rev

6、enue growth, varied degrees of efficiency gains / operating leverage, low credit costs and capital returns are driving comparisons. Underpinning our flattish revenue growth forecast (year/year and quarter/quarter): (i) NIMs flattish to 4Q18 with 1% loan growth, but the typical day count reduction in

7、 1Q driving a modest sequential NII decline,(ii) challenging capital markets conditions: trading down 10% yr/yr; investment banking down 16% yr/yr industrywide, (iii) mortgage banking challenged, seasonally and otherwise. We expect the Large Cap Banks efficiency ratios to average out at 60% (ex. tru

8、st banks) as compared to 60.9% in 1Q18 and 59.1% in 4Q18, with considerable variance bank by bank. With respect to credit. Our 1Q19 estimates embed 2% sequentially (20% year/year) higher credit costs, reflective of relatively stable net charge-offs with comparisons most impacted by less loan loss re

9、serve depletion/some additions.What were watching (i) Competitive dynamicsloan and deposit pricing and the impact of the flattening yield curve on reinvestment spreads/ liquidity deployment and NIM prospects; (ii) financing demand C&I loan growth and capital markets activity; (iii) capital markets h

10、ealth investment banking pipelines and the health of the trading markets; (iv) operating leverage/investment spend; (v) credit quality migration, andregulatory reformCCAR and CECL infocus.DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENT

11、ITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Creditto do in its As a be the a of of as a in Additional highlights.What could move the stocks higher Simply put, greater confidence in the health and stability of the macro backdrop. Expectations for earnings growth into 2019/2020 re

12、main reasonable, assuming sustained positive GDP growth. Weve not baked in any material benefit from a higher/steeper yield curve nor do we count on a pickup in loan demand; capital markets activity is simply expected to normalize (as weve seen year to date into March); we may be underestimating the

13、 magnitude of operating leverage realization (a source of upside in 2018). Any and all of (i) a more constructive macro backdrop/firming investor confidence, (ii) incremental operating leverage realization and/or (iii) a more quantifiable benefit from regulatory reform, would be incrementally suppor

14、tive of thestocks.What could dampen sentiment Consider this the inverse of the upsidemacro and regulatorydriven,andaddincompetitionbeyondtheexpectedstatusquoofintensity.With respect to the CS Large Cap Bank stocks Well continue to assess valuations cognizant of the economic cycle, but equally as wil

15、ling to embrace the changing operating and regulatory environment, for better (improved underlying economic growth, operating leverage realization; sustained low credit costs) or worse (intensifying competition; a turn in the economic cycle). All in, our base case estimates translate to 7-10% annual

16、 EPS growth into 2020 and a 16% ROTCE, on average. Our blue sky estimates are 20% above base case, with near equal incremental upside in the stocks. Looking at a weighted average of our blue sky, base case and gray sky scenarios translates to 20%+ total return in our recommended namesBAC, JPM, GS, C

17、 and MS. We strongly favor the universal banking model with its multiple levers for growth and greater potential for realization of scaleeconomies.Recent research worth highlighting HYPERLINK /s/V7gkZq4AF-Z04A US Large Cap Banks: 1Q19 Mid Quarter Update #2. Updating the DataPoints HYPERLINK /s/V7gxz

18、I4AF-YLLe Banking on the Markets: Late Cycle Realities. Markets Recovering, ButNo HYPERLINK /s/V7gxzI4AF-YLLe Match to Year AgoLevels HYPERLINK /s/V7gmQl4AF-Z04A Large Cap Banks: Moving Through the Extending Cycle-Credit Quality Indicators HYPERLINK /s/V7gmQl4AF-Z04A Stable, nearterm HYPERLINK /s/V7

19、gK7t4AF-Z04A Large Cap Banks: Time to Stress-2019 CCAR Scenarios Released (This Is Step1) HYPERLINK /s/V7gh2e4AF-Z04A Large Cap Banks: Time to Stress, Step 2 2019 CCAR InstructionsReleased HYPERLINK /s/V7gRNW4AF-Z04A U.S. Large Cap Banks: What We Learned from the Banks at the 20th AnnualCS HYPERLINK

20、 /s/V7gRNW4AF-Z04A Financial ServicesForum HYPERLINK /s/V7ewqp4AF-YLLe Prepare for the Great Divide: CS Large Cap Banks 2019Outlook HYPERLINK /s/V7endB4AF-YLLe Large Cap Banks: Fear Factor-Perspective Setting with a Look Backwards and HYPERLINK /s/V7endB4AF-YLLe Forward at CyclicalTurnsLarge Cap Ban

21、ks1Q19 Earnings PreviewLarge Cap Banks1Q19 Earnings Preview3Figure 1: Credit Suisse Estimates vs. ConsensusHistorical results and estimates on an as-reported basisSuper Regional Banks, median6%-5%Super Regional Banks, median6%-5%-1%14%30%6%7%CS vs.Reporting201720182019E2020E2017/2018/2019E/ 2020E/1Q

22、184Q18CSStreetYr/YrQ/QDateCSCS2016201720182019EGoldman Sachs$6.95$4.83$4.90$5.14-30%1%-5%15-Apr$19.76$24.02$23.50$23.97$26.25$25.9921%22%-2%12%Morgan Stanley$1.45$0.73$1.12$1.23-23%52%-9%17-Apr$3.60$4.67$4.85$4.82$5.40$5.3323%30%4%11%Bank of America$0.62$0.70$0.65$0.665%-8%-2%16-Apr$1.82$2.62$2.85$2

23、.85$3.20$3.1422%44%9%12%Citigroup$1.68$1.61$1.75$1.814%9%-3%15-Apr$5.11$6.65$7.50$7.50$8.75$8.548%30%13%17%JPMorgan Chase$2.37$1.98$2.42$2.362%22%3%12-Apr$6.87$9.00$9.75$9.73$10.80$10.4311%31%8%11%Wells Fargo$0.99$1.13$1.05$1.127%-7%-6%12-Apr$3.99$4.28$5.00$4.97$5.85$5.760%7%17%17%Universal Banks,me

24、dian3%5%-4%16%30%9%12%Citizens Financial$0.78$0.98$0.88$0.8912%-11%-1%18-Apr$2.58$3.55$3.85$3.87$4.15$4.1831%38%8%8%PNC Financial$2.43$2.75$2.63$2.618%-4%1%12-Apr$8.44$10.71$11.45$11.37$12.20$12.1316%27%7%7%Regions Financial$0.35$0.37$0.36$0.372%-5%-3%18-Apr$1.04$1.36$1.55$1.58$1.70$1.7023%30%14%9%S

25、unTrust Banks$1.29$1.48$1.30$1.310%-13%-1%18-Apr$4.04$5.68$5.85$5.81$6.20$6.1712%41%3%6%BB&T Corp.$0.97$1.05-$1.025%-3%-18-Apr$3.14$4.05-$4.29-$4.699%29%6%9%U.S. Bancorp$0.96$1.07$1.02$1.006%-4%2%17-Apr$3.42$4.11$4.35$4.33$4.60$4.626%20%6%6%BNY Mellon$1.10$0.99$0.97$0.96-12%-2%1%17-Apr$3.55$4.20$4.3

26、0$4.23$4.80$4.6013%18%3%12%Northern Trust$1.55$1.66$1.50$1.47-4%-10%2%23-Apr$4.73$6.48$6.55$6.59$7.40$7.2710%37%1%13%State Street$1.62$1.68$1.22$1.22-24%-27%0%23-Apr$6.36$7.04$6.50$6.68$7.35$7.5278%11%-8%13%Comerica$1.54$1.95-$1.9326%-1%-16-Apr$4.73$7.24-$8.16-$8.6857%53%13%6%Fifth Third Bancorp$0.5

27、7$0.69-$0.560%-18%-23-Apr$1.84$2.53-$2.77-$3.0710%37%9%11%First Republic$1.08$1.29-$1.2213%-5%-12-Apr$4.55$4.78-$5.32-$6.0017%5%11%13%Huntington$0.28$0.32-$0.3215%1%-25-Apr$0.98$1.22-$1.35-$1.4413%24%11%7%KeyCorp$0.38$0.45-$0.419%-8%-18-Apr$1.36$1.72-$1.84-$1.9822%26%7%8%Zions$1.02$1.07-$1.052%-2%-2

28、2-Apr$2.80$4.04-$4.44-$4.8039%45%10%8%CS Large and Mid Cap Bank median4%-4%-1%16%30%8%11%5 April 2019Trust and Securities Processing, median-12%5 April 2019Trust and Securities Processing, median-12%-10%1%13%18%1%13%CS Large Cap Bank Universe, median2%-5%-1%14%30%6%11%First Quarter 2019 Expectations

29、The CS Large Cap Bank group will begin reporting first quarter earnings on Friday morning, April 12, with JPMorgan, Wells Fargo and PNC weighing in first (see the calendar in Figure 1 with our bank by bank estimates). What to expect With less macro and market support, slower revenue growth is to be

30、expected; operating leverage, low credit costs and share repurchase are driving EPS growth. All in, we forecast 2% yr/yr EPS growth with a 14% average ROTE. More important is the forward look Earnings growth will remain closely tied to GDP growth, market health and competitive position; share price

31、performance will tie to valuation (how much risk is discounted) and investor confidence in the cyclicalpath.Fundamentals OK; Expectations AchievableAs detailed in Figures 1-3, we expect the CS Large Cap Banks 1Q19 EPS to increase 2% year/year supported by a 4% share count reduction; net income is ex

32、pected to be down 5% year/year (median basis); to be sure, the averages are dragged down by those banks more reliant on capital markets. Our universal banks are expected to report EPS +3% yr/yr and +5% qtr/qtr; with less of a market-related revenue impact, our super-regional banks are expected to pu

33、t up +6% yr/yr and -5% qtr/qtr EPS growth; the trust banks are expected to generate -12% yr/yr and -10% qtr/qtr EPScomparisons.Figure 2: CS Large Cap Banks1Q19E Year-over-Year EPS GrowthHistorical results and estimates on an as-reported basisEPS Growth (Yr/Yr) EPS Growth (Yr/Yr) Median =2%10%5%0%-5%

34、-10%-15%-20%-25%-30%CFGPNCWFCUSBBACCRFJPMSTINTRSBKMSSTTGS-35%CFGPNCWFCUSBBACCRFJPMSTINTRSBKMSSTTGSSource: Company data, Credit Suisse estimates.Figure 3: CS Large Cap Banks1Q19E Quarter-to-Quarter EPS GrowthHistorical results and estimates on an as-reported basisEPS Growth (Qtr/Qtr) EPS Growth (Qtr/

35、Qtr) Median = -5%50%40%30%20%10%0%-10%-20%-30%MSJPMCGSBKRFUSBPNCWFCBACNTRSCFGSTISTT-40%MSJPMCGSBKRFUSBPNCWFCBACNTRSCFGSTISTTSource: Company data, Credit Suisse estimates.Figure 4: CS Large Cap Banks1Q19E Year-over-Year Net IncomeGrowthHistorical results and estimates on an as-reported basis10%Report

36、ed Net Income to Common Growth (Yr/Yr) Median = -5%STICRFBKMSGSSTICRFBKMSGSPNCCFGUSBWFCJPMBACNTRSSTTSource: Company data, Credit Suisse estimates.PNCCFGUSBWFCJPMBACNTRSSTTFigure 5: CS Large Cap Banks1Q19E Qtr/Qtr Net IncomeGrowthHistorical results and estimates on an as-reported basis50%40%30%20%10%

37、MSMSReported Net Income to Common Growth (Qtr/Qtr) Median = -7%JPMBKSTTCPNCRFSTIUSBBACCFGWFCNTRSGSSource: Company data, Credit Suisse estimates.JPMBKSTTCPNCRFSTIUSBBACCFGWFCNTRSGSWhat Were WatchingBalance sheet positioning and the cost of competition One has to assume intensifying price competitiont

38、his is where we are in the cyclewith competitive dynamics exacerbated by (i) the strength/marketing prowess of the bigger banks,(ii) the divergence in loan to deposit ratios, translating to more pressure for those with higher loan to deposit ratios and those who compete on price alone. In terms of b

39、alance sheet positioning well have a close eye on liquidity deployment and securities portfolio mix, including duration extension. And what of the shape and level of the yield curve this too will be a focal point of conference call discussions with NIM expansion expectations tempered/compression ris

40、kincreasing.Financing demand and funding availabilityloan and deposit growth Based on the latest Fed H8 (see Figure 27), industrywide loan growth in 1Q19 is tracking up 5.5% yr/yr (compares to the 4.8% pace in 4Q18). How sustainable is the sequential quarter pick up in C&I? Deposit growth is trackin

41、g up 4.0% yr/yr (compares to the 3.2% yr/yr pace in 4Q18 and 3.5% on average for 2018); quarter to quarter, deposit growth kept pace with loan growth, but we dont expect that growth to be spread evenly (in terms of volume or price). Well be listening closely to management commentary around pipelines

42、, payoffs and the quality of loandemand.With respect to the capital markets Not quite the first quarter that we might have hoped for with capital markets revenue generation recovering, but not fully recovered and clearly not matching year ago levels. Trading was good, not greatup against challenging

43、 year over year comparisons; investment banking revenue generation was weak, but improved into quarter end, with the supporting positive of asset price increases; investor risk appetite remained weak. We reduced capital markets related revenue expectations in mid-March. Looking forward, the macro ba

44、ckdrop and with that, confidence, conviction/risk appetite and asset price support remain critical to a more constructive capital markets revenueforecast.Operating leverage realization and investment spend management Operating leverage realization has been a significant source of earnings upside ove

45、r the last year; we expect that this will continue to be the case into 2019, albeit to varied degrees. Our focus will be on our banks investment priorities and financial targetsgauging the magnitude of benefit from unit operating cost reductions and how quickly the universal banks can drive efficien

46、cy down into the targeted mid-50srange.Credit quality migration and loan loss reserve coverage. Commercial credit indicators were stable to favorable (declining default rates) in the first quarter and the consumer remains in good health. We expect no more than a modest uptick in net charge-off rates

47、; credit cost increases will tie more closely to less in the way of incremental loan loss reserve drawdowns, if not net loan loss reservebuild.Capital management and regulatory reform prospects (i) New CCAR/capital requirements/GSIB surcharge recalibrationprogress and prospectsexpect more dialogue a

48、round this topic with 2019 CCAR submissions due on April 5th, (ii) CECL implementation, estimates and expectations (2020 isnt that far offanymore).With Respect to the StocksWhat could move the stocks higher simply put, greater confidence in the health and stability of the macro backdrop. Expectation

49、s for earnings growth into 2019/2020 remain reasonable, assuming sustained positive GDP growth. Weve not baked in any material benefit from a higher/steeper yield curve nor do we count on a pickup in loan demand; capital markets activity is simply expected to normalize; we may be underestimating the

50、 magnitude of operating leverage realization (a source of upside in 2018). Any and all of (i) a more constructive macro backdrop/firming investor confidence, (ii) incremental operating leverage realization and/or (iii) a more quantifiable benefit from regulatory reform, would be incrementally suppor

51、tive of the stocks.What could dampen sentiment Consider this the inverse of the upsidemacro and regulatorydriven,andaddincompetitionbeyondtheexpectedstatusquoofintensity.With respect to the CS Large Cap Bank stocks Well continue to assess valuations cognizant of the economic cycle, but equally as wi

52、lling to embrace the changing operating and regulatory environment, for better (improved underlying economic growth, operating leverage realization; sustained low credit costs) or worse (intensifying competition; a turn in the economic cycle). All in, our base case estimates translate to 7-10% annua

53、l EPS growth into 2020 and a 16% ROTCE, on average. Our blue sky estimates are 20% above base case, with near equal incremental upside in the stocks. Looking at a weighted average of our blue sky, base case and gray sky scenarios translates to 20%+ total return in our recommended namesBAC, JPM, GS,

54、C and MS. We strongly favor the universal banking model with its multiple levers for growth and greater potential for realization of scaleeconomies.Line of Business/Line Item TrendsFundamentals driving the comparisons flattish revenue growth, stable to improving efficiency (considerable variance her

55、e), low credit costs and capital returns.Figures 6 and 7 summarize the key assumptions underlying our estimates: flattish revenue growth, stable efficiency ratios, low credit costs and capital returns are driving comparisons. Underpinning our flattish revenue growth forecast (year/year and quarter t

56、o quarter): (i) NIMs flattish to 4Q18 with 1% loan growth, but the typical day count reduction in 1Q driving a modest sequential NII decline, (ii) challenging capital markets conditions: trading down 10% yr/yr; investment banking down 16% yr/yr industrywide, (iii) mortgage banking challenged, season

57、ally and otherwise. We expect the Large Cap Banks efficiency ratios to average out at 60% (ex. trust banks) as compared to 61% in 1Q18 and 59% in 4Q18; the year/year comps make more sense here given seasonality. With respect to credit. our 1Q19 estimates embed 2% sequentially (20% year/year) higher

58、credit costs, reflective of relatively stable net charge-offs with comparisons most impacted by less loan loss reserve depletion/some additions.Figure 6: Key Assumptions in Large Cap Bank*EstimatesChange in percent or basis points, median Large Cap Bank estimates. Historical data and estimates on as

59、-reported basis2017/2018/ 2019E/ 2020E/1Q19 Estimates:2016201720182019EYr/Yr Qtr/QtrComments:Net interest margin(NIM),FTE12bps11bps3bps0bps7bps1bpsNot banking on material NIMexpansion Loangrowth(avg)2%2%3%2%3%1%Net interest revenuegrowth,GAAP8%6%4%3%5%-2%Tradingrevenuegrowth-4%1%1%3%-11%47%Trading c

60、omps challengingyr/yrInvestment bankingfeegrowth18%2%1%6%-8%-9%0%1%Noninterestrevenue0%1%Revenue growthRevenue growth4%5%2%3%Operatingefficiencyratio62%60%58%57%60%60%Absolute basis, considerablevariancePretax preprovisionincomegrowth4%10%5%6%1%-2%Provisionexpensegrowth-6%-3%25%23%20%2%Less benefit