In a new report, Deutsche Bank analyst Matt O’Connor discussed what the recent selloff in bank stocks means in terms of market expectations for 2016 bank earnings. O’Connor believes significant earnings downside has already been priced into bank stocks.

Deutsche Bank’s analysis indicates that the market is now expecting 10 percent downside to big U.S. bank earnings this year. O’Connor noted that, if macroeconomic conditions improve in the short-term, the bank selloff may prove to be an overzealous knee-jerk reaction. However, if the economy continues to deteriorate, he sees plenty more room to the downside for bank earnings.

“We est [estimate] a modest C&I cycle could hit EPS by 10 percent and a haircutting of trading, ibanking and wealth/asset mgmt. would reduce mkt sens banks by another 7-10 percent,” O’Connor explained. He added that lower-than-expected net interest income represents up to 5.0 percent additional earnings downside.

O’Connor said Deutsche Bank sees…

Click here to continue reading

Want to learn more about how to profit off the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common Sense. I don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!