Search Coverage List, Models & Reports

Investors myopically focused on 2Q results are not seeing the forest for the trees as the biggest question on investors’ minds is how the changing rate landscape will impact future earnings for 2020 (and beyond). Unfortunately assessing the impact of lower rates cannot be done in a vacuum as equity market levels, capital markets activity, retail cash levels, and credit losses will vary significantly under different macro scenarios. Given these complicating factors, we refined our previous late-cycle scenario analysis (see 2019 Outlook) and introduce three new scenarios to better capture the changing rate landscape: 1) Bull Case (insurance cut, market melt-up); 2) Base Case (3 cuts by mid-2020, choppy markets); and 3) Bear Case (garden variety recession incl. 6 cuts, 30% market correction, spike in credit losses). 

This week our Diversified Banks & Brokers Index was up (+1%) WoW tracking in line with the S&P Fins. and outperforming the S&P 500 by 100bps. Our index received a generous bump from the G-SIBs performance on Friday (+2% on average) following no objection from the Fed across the board on capital return plans. We outline the firms which surprise positively versus consensus payout estimates in our 2019 CCAR Results note and on slide 4. SF (+5%), GS (+4%), and NTRS (+4%)  were the best performers this week while ETFC (-4%) and LAZ (-4%) lagged. The YTD leaderboard remains consistent with SF (+43%), C (+35%) and LPLA (+34%) the best performers and BK (-6%), LAZ (-7%), and STT (-11%) the biggest laggards.

This week our WR Banks & Brokers Index was down -1% WoW, lagging the S&P 500 and S&P Fins. by 100bps. C (+3%) and BAC (+2%) were our relative outperformers, with Citi benefitting from WoW estimate revisions (+1%). STT (-2%) saw estimates revise down by -3% following guidance on NII, and it joins the eBrokers (-3%) as our relative laggards following disappointing monthly metrics. LPLA (+37%), SF (+37%), and C (+30%) continue to outperform the rest of our coverage YTD, while STT (-12%), LAZ (-9%), and BK (-5%) remain our worst performers.

This week our WR Banks & Brokers Index was down -5% WoW, lagging the S&P 500 (-3%) and S&P Fins. (-3%). Relative outperformers within our coverage include Citi and JPM which both preformed in line with the broader market (-3%). We explore Citi in greater detail on slide 5 which provides some context on this relative outperformance. The remainder of our coverage underperformed the market by 100-300bps with LAZ, EVR, LPLA, BAC, STT, and BK all at the lower end of the range. YTD trends remained consistent with LPLA maintaining pole position (+31%), followed by SF (+29%) and C (+19%). LAZ (-16%), STT (-12%), and BK (-9%) continue to increase distance from the rest of our coverage and solidify spots as the bottom three relative underperformers.