Bank fundamentals were challenged but results were better than worst-case fears as higher interest rates boosted bank loan yields, Jefferies analyst Ken Usdin said Thursday in the firm’s summary of second-quarter profits for the 36 large and mid-sized banks in its coverage universe.
JPMorgan Chase & Co. JPM won kudos as a winner among large-cap banks for its upward revision to $87 billion from its earlier view of $81 billion for its estimated 2023 net interest income excluding its markets results, Jefferies noted. Also read: Goldman Sachs’s stock powers into positive territory for 2023 as analysts look past mixed Q2
Summing up their top picks for the quarter among the 18 large banks it follows most closely, Jefferies analysts said they prefer Bank of New York Mellon BK over State Street Corp. STT among trust banks as well as Fifth Third Bancorp FITB and Comerica Inc. CMA among larger banks. Among the entire group of 36 banks, fees and costs were mixed, and provisions were lower as a partial offset, Usdin said.
Higher funding costs as customers shifted to higher interest-paying products such as certificates of deposits were also in the mix. This was offset by incremental net interest margin benefits from free funding and higher asset yields, Jefferies said.
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