With conference season kicking off this week, we wanted to share a few files that we thought might be helpful. The first is our Question Bank, which includes both company specific and general questions for all of the firms in our coverage presenting and/or participating in 1x1s. We also included some Guidance Tearsheets which compare our modeled forecasts to each piece of company guidance in an easy-to-read format. Please feel free to use us as a resource in case you need anything ahead of your meetings.
Search Coverage List, Models & Reports
Search Results1-10 out of 25
The Fed published assumptions for 2019 CCAR scenarios after the market close (2/5/19), though this year the release excluded CCAR Instructions which are typically published at the same time. For the 2019 Severely Adverse scenario (which dictates capital targets for individual firms), the Fed does contemplate a more severe recession including a steeper decline in GDP, and a higher spike in unemployment. That said, other aspects of the test appear less severe compared with prior exams, including a more benign equity / credit market selloff (+ for GS, MS, STT), and a less severe rate / OCI shock (+ for STT, BK, BAC; Ex. 5-6). While there are no clear negative outliers among the individual banks, the Fed did highlight a more cautious view on international (both Europe and Developing Asia), which coupled with a higher spike in unemployment (implying higher Card losses), may pose a greater threat to Citi.
This week our WR Diversified Banks & Brokers Index was up +10bps, trailing the broader market (+160bps) but tracking largely in line with the S&P Fins. (+10bps). We saw meaningful dispersion in terms of share performance as the Retail Brokers and M&A firms were powered by strong 4Q results / favorable guidance, with LPLA (+7%) and EVR (+6%) clear standouts. The biggest laggards this week were the asset sensitive banks and capital markets firms, including BAC (-4%) and MS (-3%). While bank / broker shares took a breather this week, YTD performance has been strong, particularly at those firms which underperformed by a wider margin in 4Q18 but reported strong results including EVR (+26%), LPLA (+23%), and Citi (+22%), while mixed 4Q results have weighed on performance at JPM (+6%), WFC (+6%) and MS (+5%).
This week our WR Diversified Banks & Brokers Index was down modestly (-30bps), largely in line with the S&P Fins. (flat) and the broader market (-20bps). Share trends over the last week were quite bifurcated, with STT (+2%), AMTD (+2%), Citi (+1%), and BAC (+1%) the relative winners and ETFC (-6%), EVR (-2%), and MS (-2%) the laggards. That said, YTD performance remains quite strong, with our index outpacing the S&P 500 by ~700bps. Citi (+23%), BAC (+20%) and GS (+20%) have been clear winners so far, while LAZ (+5%), JPM (+6%), and MS (+8%) have been the relative laggards. As we approach the end of 4Q earnings season, we wanted to highlight some key debates on select stocks:
This week our WR Diversified Banks & Brokers Index was up +7%, slightly outpacing the S&P Fins. (+6%) but tracking well ahead of the broader market (+3%). The move higher was led by broad-based strength across the group, with GS (+14%), BAC (+13%), Citi (+11%), and BK (+10%) the clear winners following encouraging 4Q results / commentary. Relative laggards over the last week were WFC (+4%), JPM (+5%), and MS (+5%).
Following 4Q earnings for the Universal & Trust Banks (with the exception of NTRS which reports Jan. 23), we remain constructive on the Money Centers / Universal Brokers, where we see upside to cons. (ex. WFC, where we are below primarily on fee income) and valuations remain attractive. We remain cautious on the Trusts, particularly BK and STT, where we see meaningful downside risk to cons., especially for STT, given disappointing guidance on fee income growth in 2019. For a summary of estimate and PT changes post-earnings, please see page 2.
Citi 4Q results were a bit underwhelming as revenues fell short of both our and cons. expectations. However, mgmt. reaffirmed long-term targets for revenue growth, efficiency, and ROTCE; more importantly, mgmt. issued favorable guidance on NII, credit, and tax suggesting meaningful upside to 2019 cons. In addition, Citi guided to net expense savings of ~$600mn each in 2019 and 2020, which should also help drive efficiency improvement and offset future volume-driven expense growth. Following a difficult 4Q18 for Citi shareholders, we are encouraged by strong performance out of the gate and see room for continued outperformance given steep valuation discount (<95% TBV) and ~12% ROTCE potential in 2019-2020. Maintain OP rating.
Citi reported 4Q18 EPS of $1.64 vs. our est. of $1.52 and cons. of $1.55. Excluding items including benefit of lower tax rate (~$0.13), core EPS was $1.51, slightly below our estimate and cons. Vs. our estimate, the miss was driven by weaker revenues in both ICG (-0.02) and Global Consumer (-$0.02), with results impacted by tougher trading environment in Dec. (both FICC and Equities), as well as fee pressures in Asia Consumer. This was partially offset by lower provision (+$0.02) and lower sharecount. Strong growth in BVPS (+3% QoQ) was also positive. For additional detail on sources of earnings surprise, see our earnings variance sheet on pg. 2.
This week our WR Diversified Banks & Brokers Index was up +2.7%, slightly outpacing the broader market (+2.5%) and tracking ahead of the S&P Fins. (+1%). The move higher was led by the Regional Brokers (+7%), with the M&A Independents (+1%) and Universal Brokers (+1%) lagging the rest of the group.
- 1 of 3
- next →