For Immediate Release
Chicago, IL – April 16, 2013 – Today, Zacks Equity Research discusses the U.S. Banks, including JPMorgan Chase & Co. (JPM) and Wells Fargo & Company (WFC).
A synopsis of today’s Industry Outlook is presented below. The full article can be read at
U.S. banks entered 2013 with uninterrupted expense control, sound balance sheets, an uptick in mortgage activity and lesser credit loss provisions. Moreover, a favorable equity and asset market backdrop, falling unemployment, a progressive housing sector and a flexible monetary policy have been making the road to growth smoother.
Yet top-line growth remains uncertain due to continued sluggishness in loan growth, pressure on net interest margins from the sustained low rate environment and less flexible business models owing to stringent risk-weighted capital requirements (Basel III standard). However, banks have been gradually easing their lending standards and trending toward higher fees to dodge the pressure on the top line.
Moreover, U.S. banks are actively responding to legal and regulatory pressures, indicating competence to encounter impending challenges. But the potency of the sector is not expected to return to its pre-recession peak anytime soon. Economic intricacies, both domestic and overseas, may even result in some more disappointments in the upcoming quarters.
Overall, structural changes in the sector will continue to impair business expansion and investor confidence. Several dampening factors -- asset-quality troubles, mortgage liabilities and tighter regulations -- will decide the fate of the U.S. banks in the quarters ahead. But entering the new capital regime will ensure long-term stability and security for the industry.
Zacks Industry Rank
Within the Zacks Industry classification, U.S. banks are broadly grouped in the Finance sector (one of 16 Zacks sectors) and are further sub-divided into six industries at the expanded level: Banks-Major Regional, Banks-Midwest, Banks-Southeast, Banks-West, Banks-Southwest and
Banks-Northeast. The level of sensitivity and exposure to different stages of the economic cycle vary for each industry.
We rank all the 260 plus industries in the 16 Zacks sectors based on the earnings outlook and fundamental strength of the constituent companies in each industry. To learn more visit: About Zacks Industry Rank.
As a guideline, the outlook for industries with Zacks Industry Rank of #88 and lower is 'Positive,' between #89 and #176 is 'Neutral' and #177 and higher is 'Negative.'
The Zacks Industry Rank for Banks-Southeast and Banks-West is #60, Banks-Northeast is #84, Banks-Major Regional is #90, Banks-Southwest is #99 and Banks-Midwest is #213. Considering the Zacks Industry Rank of the six banking industries, one could safely say that the near-term outlook for the group is leaning towards 'Positive.'
Signs of Improvement
Only a few banks have reported first-quarter 2013 results so far. Among these, the stupendous performances of a couple of mammoth players -- JPMorgan Chase & Co. (JPM) and Wells Fargo & Company (WFC) -- indicate the improved health of the sector, as these two banks command a significant portion of the U.S. banking market.
Results of these two mega banks show that top line still needs to improve for assured strength in performance. In addition to their fundamental strength, the positive developments of the sector and better macroeconomic elements helped most of the business segments of these two banks report improved results. Most importantly, similar to the last couple of quarters, these two banks did not have to majorly depend on accounting tricks to increase their earnings.
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