Which Big Banks Will Beat the Street?

MKM Partners’ David Trone and Pankaj Chitrakar think the big banks will see earnings increase by 11% during the third quarter, with Citigroup (C), Bank of America (BAC), Goldman Sachs (GS) and Morgan Stanley (MS) beating earnings. They explain why:

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We maintain our bullish stance on the five bulge-bracket names, which we rolled out starting on May 21. While each may have their own twists in the thesis, we generally believe that the steadily improving economic and capital markets backdrop will drive investment banking and loan growth higher, while trading is likely to rebound as the extended period of low volume and volatility is starting to shift back toward more normal conditions in September.

JPMorgan Chase (JPM) is the only bank Trone and Chitrakar don’t see beating forecasts. They explain why:

[We're] maintaining our $1.38 est., in-line with consensus. We expect core revenue of $25 bil., sequentially flat, despite seasonal headwinds, and up 5% vs. 3Q13 on strength in investment banking (+23%) mitigated by declining mortgage banking. Credit costs should normalize at $1 bil. while core expenses of $15 bil. should be up 2% sequentially and 3% year-over-year. On balance, core EPS should be down 14% sequentially, and also down 3% against 3Q13 which enjoyed below normal credit costs.

Shares of JPMorgan Chase have gained 0.5% to $59.35, while Bank of America has advanced 0.8% to $16.73, Goldman Sachs has risen 0.7% to $182.56 and Morgan Stanley is up 0.6% at $33.49. Citigroup is off 0.7% at $50.79.