Big bank earnings season is just around the corner, and U.S. Bancorp
landed a big Wall Street upgrade on Thursday ahead of its upcoming report.
The Analyst: J.P. Morgan analyst Vivek Juneja upgraded U.S. Bancorp from Neutral to Overweight and raised his price target from $53 to $60. Juneja also raised price targets of the other seven large cap banks stocks under his coverage: Bank of America Corp , Citigroup Inc, Citizens Financial Group Inc, Fifth Third Bancorp, Regions Financial Corp
RF 0.66% ,Truist Financial Corp and Wells Fargo & Co. WFC 0.58%
First, an improving macroeconomic environment likely means banks are releasing their credit reserves. Second, an uptick in spending means higher card-related fees.
That potentially sharp uptick in spending is particularly good news for U.S. Bancorp, which Juneja said has the most exposure to sending given card-related fees accounted for about 16% of the company’s total revenue in 2019.
“Chase card spend data shows that volumes are 12% above 2019 levels recently, inflecting from running below 2019 levels at [the] end of February,” he said.
Airlines and hospitality spending accounted for 37% of merchant acquiring volumes and 7% of retail volumes in 2019, Juneja said. Credit card volumes will be particularly important for banks given they have higher fees than debit cards.
Juneja said U.S. Bancorp trades at an attractive valuation at just 13.5 times estimated 2022 earnings.
He is also bullish on several other big bank stocks heading into the first-quarter earnings season. J.P. Morgan also has Overweight ratings for Bank of America Corp, Citizens Financial Group Inc and Regions Financial Corp.