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These 3 Bank Stocks are Reporting this Week. Which is the Best Bet for Your Money?
Stock Analysis & Ideas

These 3 Bank Stocks are Reporting this Week. Which is the Best Bet for Your Money?

Many experts predict another positive reporting season as the fourth-quarter earnings season picks up this week, with bank stocks, in particular, expecting to produce solid results.

Why are bank stocks becoming more popular this year? The market sees the Fed’s projected interest rate rise, as well as the steepening of the yield curve that would occur, as a boon to bank profitability in 2022.

When it comes to previous quarters, the bulk of the largest banks have a history of surprising investors with their results. Will they be able to beat the market again, this earnings season?

A Quick Look at Some Upcoming Releases

Let’s see what’s in the offing for these three big bank stocks – JPMorgan (JPM), Citigroup (C), and Wells Fargo (WFC) – that are scheduled to report fourth-quarter 2021 results on January 14.

The chart below shows a comparison of the price performance of these bank stocks.

JPMorgan

JPMorgan’s third-quarter 2021 earnings of $3.74 per share were driven by strength in the advisory business, reserve release, and a minor increase in loan demand.

For the upcoming Q4 quarter, analysts predict JPMorgan will announce adjusted earnings of $3 per share, a fall of 20.8% year-over-year.

Also, the firm pays a dividend with a current yield of 2.27%.

On the analyst side, Societe Generale analyst Andrew Lim downgraded the stock from Buy to Hold and decreased the price target to $175 from $195, citing weaker net interest income estimates. Lim believes JPMorgan’s stock is “expensive” at present levels, and that net interest income would continue to remain weak in the upcoming quarter.

Overall, JPMorgan stock has a Moderate Buy consensus rating on TipRanks, based on 11 Buys, 4 Holds, and 2 Sells. As for price targets, the average JPM stock price prediction of $180.80 implies almost 8% upside potential from the current levels.

Citigroup

Citigroup posted strong earnings of $2.15 per share in the third quarter, above analysts’ estimates by 44 cents, thanks to robust results in investment banking (IB) and strength in stock markets.

The company’s earnings have outperformed analysts’ projections for the last four quarters. For the upcoming earnings quarter, analysts estimate Citigroup to report adjusted earnings of $1.52 per share, a fall of 26.9% year-over-year.

Citigroup has the highest dividend yield among the three stocks, at 3.1%. In a higher-interest-rate environment, investors may choose companies with better dividend yield, which might enhance stock prices.

The omicron version has undoubtedly caused some uncertainty in the short term, and analyst Jason Goldberg of Barclays appears to be concerned about it. As a result, he maintained an Equal Weight (Neutral) rating on Citigroup and lowered the price objective to $73 per share from $86.

Bank stocks, on the other hand, are expected to continue to outperform the market in 2022, according to Goldberg. He anticipates loan growth to accelerate, with rising interest rates benefiting net interest margins.

On TipRanks, Citigroup stock sports a Moderate Buy consensus rating, based on 8 Buy and 7 Hold recommendations. As for price targets, the average C stock price prediction of $79.09 implies almost 18% upside potential from the current levels.

Wells Fargo

Wells Fargo delivered strong Q3 results, thanks to the improving economic environment. The company’s growing deposit balance should continue to strengthen Wells Fargo’s liquidity position.

Looking ahead into the Q4 quarter, the majority of experts believe that the stock is now an excellent investment. They expect Wells Fargo to report adjusted earnings of $1.09 per share. This would represent a 70.3% increase in profits on a year-over-year basis.

Wells Fargo pays a dividend as well, although it’s the smallest of the three at only 1.09%.

However, there is only one analyst, Vivek Juneja of JPMorgan, who chooses to remain on the sidelines for the time being on this stock.

Juneja does expect, however, that banks should begin 2022 on a “good note,” owing to a strong increase in commercial and industrial loan growth in late Q4. Furthermore, stronger loan growth in the near future and Fed rate rises in the medium term should provide banks with a “double benefit” in 2022. As a consequence, Juneja raised his price target to $57.00 from $53.50, albeit while maintaining a Neutral rating on the stock.

The rest of the Wall Street analysts have given Wells Fargo a Moderate Buy consensus recommendation, with 15 recent ratings, including 11 Buys and 4 Holds. The company is now trading at $56.06, with an average WFC price target of $56.62 implying 1% gain from that point.

Bottom Line

Currently, Citigroup appears to be the best bet, owing to its double-digit upside potential over the next 12 months and the group’s highest dividend yield of 3.1%.

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