TFC - JPMorgan upgraded to Buy at Jefferies; Truist Zions Hancock Whitney cut to Hold
2023-07-11 08:06:58 ET
With banks facing a number of uncertainties, Jefferies analyst Ken Usdin upgraded JPMorgan Chase ( NYSE: JPM ) to Buy from Hold on the strength of its balance sheet, liquidity position, and earnings generation potential.
Meanwhile, he downgraded Truist Financial ( TFC ), Zions Bancorporation ( ZION ), and Hancock Whitney ( HWC ) to Hold from Buy on downward net interest income revisions combined with limited differentiating catalysts.
JPMorgan ( JPM ) stock gained 1.1% in Tuesday premarket trading. Truist ( TFC ) slipped 1.0% , Zions ( ZION ) fell 1.4% , and Hancock Whitney ( HWC ) dipped 1.1% .
Usdin sees JPMorgan ( JPM ) offering better insulation from preprovision net revenue/capital burdens and provisions. "JPM's balance sheet is the most liquid among large banks, providing better insulation from rising deposit costs," he wrote in a note to clients.
In addition, fee income provides stability when interest rates fall and NII declines, and the company conservatively reserves for credit deterioration, he said. "We see relative stability in forward earnings forecasts (our '24 EPS forecast up ~2%) and a best-in-class return on tangible common equity (ROTCE) in the upper-teens as continued drivers of stock outperformance."
For the downgrades, Truist ( TFC ) faces NII pressures as its balance sheet is highly reliant on wholesale borrowings and obstacles from pending regulatory changes "that could weigh on capital return for the next few years," Usdin said.
On Zions ( ZION ), "we see few positive catalyst opportunities over the next few quarters that would justify incremental re-rating and outperformance vs. peers. "Currently, the bank "faces a pressured revenue outlook, a relatively higher reliance on wholesale funding than most peers, hurdles from pending regulatory changes, and no capital return expectations."
Hancock Whitney's ( HWC ) deposit franchise outperformance "will be tougher going forward," Usdin said. "Though HWC's deposit franchise has proved resilient thus far, we believe HWC's deposits performance will convert closer to the industry average in coming quarters."
in the past year, JPMorgan ( JPM ) is the only bank of the group that has outperformed the S&P 500 ETF ( SPY ) as seen in the chart below .
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JPMorgan Chase: A Case That Demonstrates Its Strong Risk-Management Culture
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JPMorgan upgraded to Buy at Jefferies; Truist, Zions, Hancock Whitney cut to Hold