巴克莱-美股-银行业-美国大型银行业2019年展望：过去、现在与未来-2019.1.2-169页.pdf

Equity Research 2 January 2019 CORE Barclays Capital Inc.and/or one of its affiliates does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.PLEASE SEE ANALYST CERTIFICATION(S)AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 163.U.S.Large-Cap Banks 2019 Outlook Past,Present&Yet to Come:Less Good Doesnt Mean Bad,Buy Banks We are bullish on the U.S.Large-Cap bank stocks for 2019.Despite an expected slowdown in GDP growth,post a sharp sell-off into year-end 2018,we believe the U.S.Large-Cap bank stocks have the ability to rise and outperform the S&P 500.While investors seem to want more of a catalyst than we can offer,we expect our coverage to benefit from continued earnings/book value growth,active capital management,regulatory finalization,and an increasing benefit from leveraging technology/economies of scale.Furthermore,should the economic backdrop be more challenging than our base case(2%GDP growth,two 25bp Fed hikes,and a lower unemployment rate),we believe the group will prove to be more defensive than investors appreciate.We expect high-single-digit EPS growth in 2019 despite a 30%increase in the loan loss provision.We believe further EPS growth is possible into 2020.While we have lowered our 2019 EPS estimates by 3%at the median bank reflecting a touch slower GDP growth,a flatter yield curve,and lower market sensitive revenues,we expect several positive trends.We look for results to benefit from improved loan growth from a challenged 2018 as several headwinds dissipate(we see less pay-offs,repatriation,competition,and run-off),further net interest margin expansion(Fed still says it will hike,deposit betas rising but low),positive operating leverage(lack of DIF surcharge helps),and very active share repurchase(can buyback more shares at reduced prices).Despite lowering our price targets,they imply 40%upside for the median bank.This assumes a forward P/E of 11.7x our updated 2019 EPS estimates.At 8.9x forward EPS and a 62%P/E relative to the S&P 500,the group is trading at its lowest levels since 2011 and 2002,respectively,despite a much improved risk/return profile.Historically the group has traded closer to 13x.Looking at past three recessions,its average low approximated 9x.Our target multiple is in between these two figures.In our credit stressed scenario,we see downside of 13%.Furthermore the median bank has an all-in yield of 10.9%(7.7%buyback,3.2%dividend)which should also provide support.JPM remains our Top Pick as it provides both offensive and defensive characteristics.Among the other Money Centers,C,at 0.8x tangible book,is a solid offensive play.We also believe BAC and MS have improved their risk profiles by more than market appreciates.While we expect GS to get through its recent woes,it could take time.Among the trust banks,we view STT as a good offensive play,while BK is more defensive.Looking at the Super Regionals,we expect USB and WFC to turn corner this year,while consumer finance names like ALLY and COF appear overly discounted given our view that unemployment will remain low in the intermediate term.MTB,BBT and PNC should stand out if the backdrop proves more challenging than expected,while CFG and FITB appear more levered to a snapback in sentiment.SECTOR UPDATE U.S.Large-Cap Banks POSITIVE Unchanged For a full list of our ratings,price target and earnings changes in this report,please see table on page 2.U.S.Large-Cap Banks Jason M.Goldberg,CFA+1 212 526 8580 BCI,US Brian Morton,CFA+1 212 526 2163 BCI,US Inna Blyakher+1 212 526 3904 BCI,US Matthew Kesselhaut+1 212 526 0181 BCI,US Eugene Koysman+1 212 526 0971 Eugene.K BCI,US Barclays|U.S.Large-Cap Banks 2019 Outlook 2 January 2019 2 Summary of our Ratings,Price Targets and Earnings Changes in this Report(all changes are shown in bold)Company Rating Price Price Target EPS FY1(E)EPS FY2(E)Old New 31-Dec-18 Old New%Chg Old New%Chg Old New%Chg U.S.Large-Cap Banks Pos Pos Ally Financial Inc.(ALLY)OW OW 22.66 35.00 34.00-3 3.30 3.30-3.60 3.55-1 Bank of America(BAC)EW EW 24.64 37.00 34.00-8 2.57 2.55-1 2.90 2.75-5 BB&T Corp.(BBT)EW EW 43.32 58.00 59.00 2 3.98 3.98-4.30 4.25-1 Capital One Financial(COF)OW OW 75.59 125.00 114.00-9 11.90 11.91 0 11.80 11.40-3 Citigroup Inc.(C)OW OW 52.06 93.00 82.00-12 6.63 6.61 0 7.50 7.35-2 Citizens Financial Group Inc.(CFG)EW EW 29.73 51.00 41.00-20 3.53 3.52 0 3.90 3.80-3 Comerica Inc.(CMA)UW UW 68.69 102.00 90.00-12 7.15 7.17 0 7.85 7.80-1 Fifth Third Bancorp(FITB)EW EW 23.53 35.00 31.00-11 2.52 2.52-2.75 2.70-2 Goldman Sachs Group Inc.(GS)EW EW 167.05 289.00 247.00-15 25.82 25.00-3 26.75 25.85-3 Huntington Bancshares(HBAN)EW EW 11.92 17.00 16.00-6 1.26 1.26-1.40 1.40-JPMorgan Chase&Co.(JPM)OW OW 97.62 135.00 140.00 4 9.25 9.25-10.00 9.95-1 KeyCorp(KEY)UW UW 14.78 23.00 20.00-13 1.74 1.74-1.95 1.90-3 M&T Bank(MTB)OW OW 143.13 210.00 203.00-3 12.50 12.52 0 13.90 13.50-3 Morgan Stanley(MS)EW EW 39.65 63.00 55.00-13 5.00 4.91-2 5.30 5.15-3 Northern Trust(NTRS)EW EW 83.59 119.00 109.00-8 6.50 6.49 0 7.10 6.80-4 PNC Financial Services Gp(PNC)EW EW 116.91 173.00 156.00-10 10.77 10.81 0 11.50 11.20-3 Regions Financial(RF)UW UW 13.38 20.00 17.00-15 1.42 1.42-1.60 1.50-6 State Street(STT)OW OW 63.07 105.00 98.00-7 7.50 7.30-3 8.05 7.50-7 SunTrust Banks(STI)EW EW 50.44 79.00 69.00-13 5.68 5.64-1 6.00 5.80-3 The Bank of New York Mellon Corp.(BK)OW OW 47.07 66.00 67.00 2 4.18 4.15-1 4.50 4.40-2 U.S.Bancorp(USB)OW OW 45.70 61.00 64.00 5 4.12 4.12-4.35 4.35-Wells Fargo(WFC)OW OW 46.08 66.00 64.00-3 4.22 4.23 0 5.10 4.85-5 Source:Barclays Research.Share prices and target prices are shown in the primary listing currency and EPS estimates are shown in the reporting currency.FY1(E):Current fiscal year estimates by Barclays Research.FY2(E):Next fiscal year estimates by Barclays Research.Stock Rating:OW:Overweight;EW:Equal Weight;UW:Underweight;RS:Rating Suspended Industry View:Pos:Positive;Neu:Neutral;Neg:Negative Barclays|U.S.Large-Cap Banks 2019 Outlook 2 January 2019 3 CONTENTS YET TO COME A LOOK AT THE YEAR AHEAD(2019 OUTLOOK).5 Bank Stocks Outlook:Sharp sell-off appears overdone.5 Earnings Outlook:Operating leverage and share repurchase.25 Capital Outlook:Dividend and share repurchase for all.44 Regulatory Outlook:Finally regulatory finalization.51 Political Outlook:The race for 2020 begins now.56 Accounting Outlook:CECL looms large and leases,too.60 Technology Outlook:Digital banking is in full force.65 M&A Outlook:M&A is a secular trend with MOEs needed.78 THE PRESENT A LOOK AT THE PAST YEAR(2018 REVIEW).82 Hard Selloff into Year-end.82 A Year in Review.88 M&A Review:Deal count little change,but deal value up.92 THE PAST A LOOK AT THE PAST 25 YEARS(1991-2017).105 History Doesnt Repeat,but It Does Rhyme.105 Historical Price Performance Charts.120 Barclays|U.S.Large-Cap Banks 2019 Outlook 2 January 2019 4 Analyst homepage:https:/ 2019 Conference Dates London:May 14-15,2019 New York:September 9-11,2019 In March we will celebrate the 15th birthday of our daily Bank Brief e-mail.This product is intended to provide you with everything you need to know for the trading day ahead.Let us know if you would like to receive it each morning.This marks the 15th straight year we are publishing our Charles Dickenss“A Christmas Carol”inspired report at the start of the trading year.In“A Christmas Carol”,Ebenezer Scrooge is visited by the Ghosts of Christmas Past,Present,and Yet to Come.Each year,we aim to examine bank stocks through each of these three lenses.Barclays|U.S.Large-Cap Banks 2019 Outlook 2 January 2019 5 YET TO COME A LOOK AT THE YEAR AHEAD(2019 OUTLOOK)Bank Stocks Outlook:Sharp sell-off appears overdone Several Drivers for Bank Stocks in 2019 Despite an expected slowdown in the U.S.and global GDP growth,post a sharp sell-off into year-end 2018,we believe the U.S.Large-Cap bank stocks have the ability to rise and outperform the S&P 500 in 2019.While investors seem to want more of a catalyst than we can offer,we expect our coverage to benefit from continued earnings/book value growth,active capital management,regulatory finalization,and an increasing benefit from leveraging technology/economies of scale at a discounted valuation.Furthermore,should the economic backdrop be more challenging than our base case(2%GDP growth,two 25bp Fed hikes,and a lower unemployment rate per the Feds forecast for 2019),we believe this group will prove to be more defensive than investors appreciate.We unpack this statement below.1.Continued EPS and book value growth.We expect the 2019 EPS equation to include:Loan growth that is in-line with or even potentially better than 2018.This should reflect continued U.S.economic expansion(even if GDP growth is lower)coupled with a reduction in loan pay-offs/pay-downs,as well as less corporate repatriation of foreign earnings,that weighed on 2018.Also,the drag from run-off portfolios should continue to dissipate.Furthermore,should certain fixed income markets remain less liquid(CLOs,leveraged loans,high yield issuance,etc),we believe the banks have ability to recapture recently lost market share at more attractive terms.Of note,loan growth in 2019 should come on the books at net interest margins that approximate their highest level in 7 years.We look for loan growth to be broad based by type and geography.Continued net interest margin expansion.While deposit betas are expected to continue to increase as cumulative betas approach the 60%area seen in the 2004-06 cycle,from 25%currently(50%in 4Q18),results should benefit from a shift to a higher yielding asset mix as well as potential additional interest rate hikes.If net interest margins expand in 2019,it would mark the 4th straight year of increases,a feat not seen since the 1970s.While net interest margin compression is likely for 2020,we note from 1995 to 2015,net interest margin only expanded twice(2002 and 2009),and the banks did just fine in many of those years.Fee income growth.In 2019,look for service charges and credit card fees to continue to edge up,and we believe both trading revenue and investment banking fees have the capacity to move higher post a challenging 4Q18,and look for mortgage fees to rise as comps get easier(expect originations to increase modestly in 2019 after stability in 2018,while margins should stabilize).Smaller bolt-on acquisitions should also help.Positive operating leverage.We expect expenses to remain controlled,as continued investments in technology are funded by increased automation,digitization and branch rationalization.The elimination of the DIF surcharge in 4Q18 should also aid results.Relatively benign net charge-offs,though a higher loan loss provision.While we have been mistakenly calling for loan loss provisions to increase for several years now,it is inevitable(we originally expected a 30%increase in 2018 and now foresee a 15%decline).Still,while loan losses will likely begin to rise from historically low levels,we expect the increase to be measured and manageable.Barclays|U.S.Large-Cap Banks 2019 Outlook 2 January 2019 6 More consistent tax rates.While the 2018 results benefited from the initial impact of a reduction in the corporate tax rate,with several adjustments throughout the year,we expect results to be a little smoother in 2019,at more predictable levels.Still,the IRSs mid-December 2018 clarification around the Base Erosion and Anti-Abuse Tax(BEAT),that was included as part of the Tax Cuts and Jobs Act of 2017,does have the ability to weigh(EPS and CCAR)on those with international banking operations.Lower share counts.We expect the pace of share repurchase to remain active,as banks complete their CCAR 2018 allocations in 1H19.We expect the CCAR 2019 asks to be similar to CCAR 2018,aided by our expectation of a modestly easier stressed economic outlook and increased transparency,before CCAR undertakes a complete overhaul for the 2020 cycle.In the near term,lower stock prices allow for more shares to be repurchased.FIGURE 1 EPS Growth,2009 2019E FIGURE 2 Post-Crisis Tangible Book Value Growth,2009 2019E Source:Barclays Research Source:Barclays Research FIGURE 3 Large-Cap Bank Median Growth Rates Summary Source:Barclays Research 12%16%8%3%2%2%10%7%-10%-5%0%5%10%15%20%25%30%35%40%2009A 2010A 2011A 2012A 2013A 2014A 2015A 2016A 2017A2018E2019ERecoveryFinancial CrisisHigher interest rates,reduced taxesLow rates,Regulatory adjustment0%2%4%6%8%10%12%14%2009A2010A2011A2012A2013A2014A2015A2016A2017A2018E2019E2014A2015A2016A2017A2018E2019E2019 OutlookINCOME STATEMENTRevenue0%3%4%6%4%4%We expect continued EPS growth with modest revenue growthNet interest income0%2%6%9%6%4%as NII could increaseAverage earning assets6%6%4%4%2%2%with modest balance sheet growth Net interest margin(bp chg)(15)(9)6 14 11 4 and more modest NIM expansion Loan loss provision-33%24%26%-5%-15%29%and despite a higher provision(off a low base)Fee income-1%2%1%5%3%3%even if fee income growth remains modestExpenses-2%1%3%4%3%2%as operating leverage should continuePre-provision net revenue4%3%7%10%8%6%driving PPNR higher,whilePreferred dividends15%22%7%8%0%0%evolving rules could slow preferred issuanceNet income4%1%1%6%30%1%resulting in continued net income growth,coupled withShares-1%-2%-3%-3%-4%-4%very active share repurchaseEPS3%2%2%10%43%7%could result in high single-digit EPS growth.Tangible book8%6%6%5%3%5%and continued tangible book value expansion.RATIOSROA0.93%0.98%0.93%1.02%1.32%1.30%We expect ROA to remain improvedROE9.24%8.62%8.04%9.05%12.20%11.98%as both ROEROTCE11.70%12.10%11.10%12.56%16.88%16.73%and ROTCE have returned to healthy levelsNIM3.02%2.88%2.86%3.02%3.17%3.21%even if the pace of NIM expansion slowsOperating leverage1.66%0.69%1.51%2.13%1.90%1.66%as positive operating leverage continues(less branches,rules)Efficiency ratio63.7%63.7%63.7%60.5%59.4%57.9%driving the efficiency ratio toward the mid-50%sNCO ratio0.35%0.28%0.33%0.27%0.28%0.34%and NCOs,while higher,remain below historical levelsTax rate28.0%29.0%29.8%30.2%19.9%21.0%and tax rates level offBarclays|U.S.Large-Cap Banks 2019 Outlook 2 January 2019 7 2.A continuation of active capital management.We expect capital return to remain elevated for the time being.While the implementation of CECL,currently slated for 2020,could shave 20bps from the median banks CET1 ratio and an inaugural increase in the countercyclical buffer(CCyB)would cost the largest banks another 25bps(expect a determination in January;we see this as a 50%probability),we still believe the majority of our coverage remains above their internal CET1 targets.While the introduction of the stressed capital buffer(SCB)is likely to be a mid-2020 event,we expect several modifications from April 2018s outline to improve its construct.We believe dividends(absolute and pay