ALM is front and center for big bank risks as the Fed fights a rates war against inflation. Positive expectations for fatter margins and rising NII is being offset by a slower to recession economy that could stymie the rate impact improvements.
The regional banks hits parade continues with the 'blah' larger regionals with unappealing geographies and hit & miss product strengths. Of the bunch, we recommend the stocks of KEY, HBAN, RF & MTB., Not FITB or CFG. Most all of their bonds are attractive on relative value basis and compared to big regional banks.
Big regionals waiting for the Fed to hike rates to garner NIM/NII benefits to EPS. Loan growth still sluggish, but should pick up with economic improvement. Buy on USB & PNC stocks. TFC has good bond relative value. Still waiting on COF earnings, but its economic earnings compare favorably.
Big banks and brokers have been duking it out for decades. We conclude that the brokers have the economic earnings momentum edge as they plow through weaker managed big banks. Still, Morgan Stanley seem to be the Master Jedi as compared to "Darth Vader" revenues slugger Goldman Sachs.
Regional banks had a good 1Q21, but mostly on non-core reserve releases. We review the fee income revenues line by showing the winners and losers and how the major ones can resume growth with a normailzing economy. Spreads are largely too tight as technicals overide credit concerns.
Big banks 2020 10Ks are out and we conduct our annual ALM reviews. Rates got crushed in net interest income as asset yields fell faster than liabilities. Asset volumes could not make up for the deficit though noninterest income hedged it better for some big banks like JPMorgan.
CCAR II gets banks back into the stock buyback game even with higher losses. But some may be delayed due to their regulatory consent orders like WFC and Citi. Credit cards hit big banks more. CRE hits regionals more. More a driver of stock prices than the rest of the capital structure, although perpetual preferreds should rally more.
Big banks rounded out the annual GS Financials conference, and all are looking ahead to happy days as the vaccines roll-out in 2021. BAC sees more consumer spending, Citi getting ready for new CEO and consent order implementation, and JPMorgan looks for asset management expansion deals.
U.S. regional banks look forward to vaccines, but hate the sight of low rates. Foraging for fee income is the way to survive with some better positioned than others.
Recent risk management panel focuses on the operational risks and more complex SOFR compounding calculations as LIBOR transitions away in 2021.