Bank Shares Rallying, Loans Grow

Bank Shares Rallying, Loans Grow

$BAC, $C, $JPM, $WFC,$FITB, $BKX, $SPY

We do expect US bank shares to continue to outperform after better-than-expected Q-4 earnings and outlooks and their cheap stock prices finally broke a losing streak, thus leading the next leg of this historic Bull Market.

  • The gains will be driven by management teams reiterating their ability to drive operating leverage even in the absence of further interest rate hikes, benign credit across all asset classes, a reversal of weak capital market trends so far this year, and loan growth accelerating into Y 2019, especially given commercial and industrial backlogs
    • Analysts see fees revenue growing 2% in Y 2019 on modest capital markets revenue of +1%, and banks headwinds from marking down wealth and asset management assets during Q-4’s sell-off, comments from Morgan Stanley, Citigroup, JPMorgan and BofA suggest capital markets to act positively this year
  • KBW Bank Index (BKX) has rallied 14% YTD Vs S&P 500 6.5% gainer.
    • BKX dropped more than 18% in Q-4 of Y 2018, its worst Quarter since Y 2011
  • Fifth Third Bancorp (NYSE:FITB) said Q-4 average portfolio loans and leases increased 3% Y-Y, boosted by higher commercial and industrial lending; FITB sees year total loans, leases up 3%-3.5% Y-Y
    • Citizens Financial Group Inc. and Regions Financial Corp. said on 18 January, they expect loan growth will keep growing at low-single-digit percentage rates in Y 2019, after reporting similar growth in Q-4 of Y 2018

Note: as lending grows so grows materials and industrials.

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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