- Ally, Bank of America, BB&T, Citi, KeyCorp, Regions, Synchrony, U.S. Bancorp and Zions are well positioned.
Shares in some of the world's biggest banks are plunging. Financial stocks in the S&P 500 are down more than 11% so far this year. That's worse than oil, energy stocks, and even the emerging markets index. European banks have fallen even further.
Deutsche Bank (DB) has lost 31% so far this year, Unicredit (UNCFF) is down 35%, and Credit Suisse (CS)is 30% down. Barclays (BCLYF), BNP Paribas (BNPQF), Societe General (SCGLF), and UBS (UBS) have all lost about 20% since the beginning of 2016.
Banks we consider well positioned to benefit from these trends include Ally Financial (ALLY), Bank of America (BAC), BB&T (BBT), Citigroup (C), KeyCorp (KEY), Regions Financial (RF), Synchrony Financial (SYF), U.S. Bancorp (USB) and Zions Bancorp (ZION ).
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Conversely, banks we consider poorly positioned include American Express ( AXP ), Comerica ( CMA ), Capital One Financial ( COF ), Discover Financial Services ( DFS ), JPMorgan Chase ( JPM ), PNC Financial Services Group ( PNC ), Santander Consumer USA Holdings ( SC ) and Wells Fargo ( WFC ).
We see particular risk to the outlook for American Express and Discover given that their EPS growth remains heavily dependent on share repurchases, which we expect to be nearly 100% of net income in 2016, but may be more limited in the face of an increasingly rigorous Comprehensive Capital Analysis and Review stress-testing process this year.
Our three 2016 themes are:
- Unique business model-driven growth -- Synchrony (Best Idea), Goldman Sachs Group ( GS ), LendingClub ( LC ), MasterCard ( MA ), Signature Bank ( SBNY ), LendingTree ( TREE ), Visa ( V ) and Wells Fargo;
- Catalyst-driven value names -- Zions (Best Idea), Ally, Bank of America, Citigroup, Citizens Financial Group ( CFG ), First Horizon National ( FHN ), Huntington Bancshares ( HBAN ), Regions Financial and U.S. Bancorp;
- Industry consolidators -- BB&T, KeyCorp and OneMain Holdings ( OMF ).
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