Deutsche Bank on Tuesday upgraded JPMorgan Chase & Co. to buy from hold while downgrading Wells Fargo & Co. to hold from buy, as analysts weigh in ahead of fourth-quarter results.
Deutsche Bank analyst Matthew O’Connor said there are three key themes to 2024 — lower interest rates, which help bank capital but weigh on earnings; credit quality; and the regulatory and political backdrop.
The price target on JPMorgan
JPM,
was lifted to $190 from $140, while the Wells Fargo
WFC,
target stayed at $51.
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Of the other big banks, Bank of America’s
BAC,
target was lifted to $35 from $29, Citi’s
C,
target was lifted to $54 from $46, Goldman Sachs’s
GS,
was lifted to $385 from $305 and Morgan Stanley’s
MS,
was increased to $92 from $80.
Jefferies analyst Daniel Fannon said the firm prefers Goldman Sachs over Morgan Stanley in the short term due to Goldman’s current trading at about 1.3 times total book value.
Overall, Fannon expects another “noisy quarter” from Morgan Stanley and Goldman Sachs in the face of slack investment banking activity.
On the plus side, Fannon expects Morgan Stanley to generate growth in its wealth management unit, while Goldman Sachs will likely report positive moves in its asset management and wealth units.
The banks will also benefit from an improving backdrop for capital markets, Fannon said.
CFRA analyst Kenneth Leon reiterated buy ratings on JPMorgan Chase and Morgan Stanley. He also kept Citigroup, Bank of America and Goldman Sachs as holds.
“We think JPM and MS have the best chance to deliver better-than-expected performance in 2024,” Leon said. “BAC remains a 2024 investment play with the expectation of a soft landing for the U.S. economy that does not hurt the consumer or small businesses.”
Once Goldman Sachs unwinds its consumer strategy, it “After unwinding a failed consumer strategy, GS “may be set for a potential rebound in the capital markets,” he said.
Odeon Capital analyst Richard Bove said he expects results from Bank of America and Citigroup to be “disappointing” but he reiterated buy ratings on the banks due to an expected boost from lower interest rates.
Citigroup appears to have better long-term prospects than Bank of America, Bove said.
“It appears that Citigroup has restructured itself to meet the new financial and economic environment,” Bove said. “Bank of America, on the other hand, has perfected its model to deal with an environment that is passing.”
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