J.P. Morgan Previews Large Cap Banks

In its preview of large cap banks, J.P. Morgan said that it expects 1Q results to be “led by gradual improvement across a few metrics and thereby better than feared overall but with credit quality improvement still the key driver.” “The other driver of qoq earnings growth is likely to be lower expenses. Revenues are likely to be down qoq due to weakness in net interest income, mortgage banking, and investment banking, offsetting strength in asset management and retail brokerage,” J.P. Morgan writes. “And there may be securities gains in 1Q to boost reported earnings for some banks. There has been a lot of concern about trading revenue declines yoy, especially in FICC, but those concerns may be overdone. “One of the surprises in 1Q11 is a decline in securities portfolios and shift to cash. C&I loan growth slowed a little from 4Q, but the biggest driver of decline in total loans was credit cards. The other driver of the decline in loans in 1Q11 per Fed data was residential mortgages, but that may not show up in most banks' loan portfolios held for investment.” Bank of America Corporation BAC, which closed Thursday at $13.61; and Citi C, which closed at $4.58, are among the banks mentioned in the report.