Deutsche Bank lifted JPMorgan (JPM) to Buy from Hold and cut Wells Fargo (WFC) to Hold from Buy in its 2024 US bank outlook note on Tuesday.
Analysts raised the JPM price target to $190 from $140. They told investors that they see three key themes for 2024 for US banks: 1) lower interest rates--which are good for bank capital but generally bad for earnings; 2) credit quality--which will likely be the most important theme for bank stocks whether or not there's a credit cycle; and 3) regulation and the political backdrop.
On JPM, analysts said that in 2023, the bank was the best performer that they cover, "so it feels late to upgrade the stock now."
"However, shares should benefit from upside to net interest income guidance (vs. downside risk at peers), good leverage to a pick up in capital markets revenues, and strong capital and loan loss reserve levels," they wrote. "And while we wouldn't argue JPM shares are cheap, they also aren't expensive at 11.5x our 2024e or just a slight premium to the broader group multiple of 11.0x."
Meanwhile, WFC was the second best-performing stock in the firm's coverage in 2023, following a strong relative performance in 2022 as well.
"The strong performance in WFC in both years reflects good leverage to rising interest rates, solid core cost control, higher than peer capital levels and optimism that WFC would benefit from regulatory relief (including an eventual lifting of the asset cap," analysts said.
However, Deutsche Bank expects a weak net interest income guide for 2024, given likely lower rates and continued sluggish loan growth. Analysts also said the company's valuation seems fair.