MKM Partners Previews Banks And Brokers, Maintains Bullish Stance

David Trone of MKM Partners published an earnings preview for banks and brokers heading in to the third quarter. The analyst maintains a bullish view in his note while reiterating a Buy rating on many of the large-cap banks.

"Seasonal factors will obviously create a sequential drop in earnings, perhaps around -13 percent for the five-firm composite," Trone wrote. "However, a stronger economy and capital markets backdrop should drive about 11 percent year-over-year earnings per share growth, as five percent core top-line growth outpaces one percent core expense growth."

Third-Quarter Earnings Estimates

Bank of America Corp (NYSE: BAC) is expected to earn $0.34 per share, representing a 21 percent growth from a year ago, but a 17 percent drop from the previous quarter on seasonality. However, the analyst notes that the current estimates exclude a $5.3 billion litigation expense which could hurt earnings per share by around $0.43. Core revenue is expected to be $21.2 billion, a 3 percent decline from a year ago.

Bank of America is Buy rated with an $18 price target.

Citigroup Inc (NYSE: C) is expected to earn $1.18 per share, representing a 16 percent growth from a year ago, but a 5 percent decline from last quarter, also on seasonality. Core revenue is expected to be $19.2 billion, 5 percent higher than a year ago, but 1 percent lower than last quarter.

Citigroup is Buy rated with a $56 price target.

JPMorgan Chase & Co. (NYSE: JPM) is expected to earn $1.38 per share, in-line with the consensus estimate, which is 3 percent lower than the third quarter a year ago. Core revenue is expected to be $25 billion, flattish from the previous quarter but 5 percent higher than a year ago.

JP Morgan is Buy rated with a $65 price target.

Goldman Sachs Group Inc (NYSE: GS) is expected to earn $3.19 per share, representing an 11 percent growth from a year ago, but a 22 percent decline from the previous quarter due to "seasonal trends." Core revenue is expected to be $7.7 billion, 14 percent higher than a year ago, but 16 percent lower than last quarter due to "summer slowdowns."

Goldman Sachs is Buy rated with a $213 price target.

Morgan Stanley (NYSE: MS) is expected to earn $0.56, representing an 11 percent growth from a year ago due to a stronger wealth management and investment banking performance. Core revenue is expected to be $8.2 billion, down 4 percent from the previous quarter due to lower investment banking and trading revenues, but 1.4 percent higher than a year ago.

Morgan Stanley is Buy rated with a $41 price target.