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Keefe, Bruyette & Woods Director of Research Fred Cannon on who will be the winners and losers this earnings season in the financial sector.
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Wells Fargo falling after reporting fourth quarter earnings on Friday and with -- little -- scheduled to roll out results this week.
How financials -- -- this earnings season Fred cannon director of research that he DW he joins us right now Fred thanks for joining us.
I wanna -- broadly first and then talk about your picks and because of time here.
Broadly speaking the financials very strong point twelve outperformed the broader stock market up more than 25%.
And where do you fall on the financials heading into the big reporting season this week.
While we have 125% last year having a pretty good year annualized this year I think you have to be cautious.
I think wells taught us that because while people are getting excited -- the recovery home prices going up.
It's not coming through in core earnings growth yet at the banks because this interest rate environment -- very tough for them side.
I think we're gonna be wanna be cautious going into earnings.
So I told everybody you'd be naming names so that they get -- -- their portfolios with what you suggest here.
I you're calling for three -- the eleven regional names to beat expectations which three.
What -- -- MTV US bank and fifth third we think that they dollar in a position because of their mix of earnings a lot of fee income.
Because of merger in the case -- TB those are the ones where you could see them buck this trend of overall pressure on earnings so we think those of the places to be in a high quality names to.
And I wanna tell everybody and and key will be reporting this week on Wednesday fifth third reporting on Thursdays that something you can.
Act on right now so those are where you're calling for beads.
Which is six of -- you are predicting of the regional banks.
You say well miss expectations which sex.
Yeah we have a number of them and in fact it's going to be more than six is going to be across the board but we look at that.
A key core European seen some of these other names squared is net interest margin pressure because of this flat curve.
Much like Wells Fargo even if they make the number.
The stocks could trade up because she folks just like Wells Fargo we're looking at the net interest margin much as they're looking at the number and it -- Fred net interest margin gives us a gauge of future profitability for the firm cracked.
Absolutely -- just simply the spread between what your turn on your loans and what you pay for your deposits is that comes down your future profitability goes down with -- and a couple of and you expected meet expectations which for those.
However number that are gonna meet that and again I think it's gonna be the the issue right there.
The net interest margin but for the bigger ones we look at BankAmerica we've -- at.
I JPMorgan and who could be we have -- what would also have investors look at Goldman Sachs going into the quarter we think they can have a good beat based on non interest income.
Are they could get people excited about that.
And Bank of America I want to remind everybody Fred is reporting this week as well that's a big one to watch Goldman Sachs.
Among them so this is going to be a hot week -- for the financials and many say this'll be a very telling week.
For the rest of the year stuff Fred cannon Allan thank you so much for joining us on the financials right now this is going to be -- -- the -- are right thanks David sandy.
