With large-cap financials set to release Q1 earnings this week, analysts at BMO Capital Markets issued a report that included their top 10 topics for financial stocks this earnings season. Here’s what they say that investors should be looking for:
1. Deferred Tax Assets
Analysts see growth in capital resulting from ongoing release of deferred tax assets that are excluded from regulatory capital ratios.
2. End Of Litigation?
Analysts forecast capital growth coming from normalization of Financial Crisis-linked litigation for banks such as Citigroup Inc C 0.44%, Bank of America Corp BAC 0.51% and JPMorgan Chase & Co JPM 0.6%.
3. Capital Ratio Thresholds
Analysts expect that a third of the big banks under their coverage will be inadequately capitalized by the end of 2016. They name Bank of America and The Goldman Sachs Group Inc GS 0.03% as two banks that will face particular difficulties meeting regulatory requirements.
4. Strong Dollar Headwinds Continue To Blow
The importance of international business and the roll-off of forex hedges will be topics of concern for investors of Visa Inc V 1.1% and MasterCard Inc MA 0.36%.
5. Real Regulatory Risk Versus Headline Risk
Analysts see real risk from new regulation for installment lenders, but not for student lenders.
6. Subprime Auto Lending
Analysts see increasing originations, higher margins and lower provisions for Santander Consumer USA Holdings Inc SC 0.88%.
7. Trading Hinges On FICC
Trading income will be heavily dependent on fixed income, currencies and commodities, as volatility has been extreme throughout Q1.
8. Dynamic Income Sources
Analysts forecast weakness in net interest income and relative strength in fees.
9. M&A Activity
Analysts expect CIT Group Inc’s CIT 0.32% acquisition of OneWest and Springleaf Holdings Inc’s LEAF 0.63% acquisition of OneMain to close in 3Q15.
10. Co-Brand Card Competition
Analysts predict that investors will see the impacts of co-brand contracts in American Express Co’s AXP 0.4% Q1 results.
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