Major banks are due to report quarterly financial reports this week, kicking off the fourth-quarter corporate earnings season. Large financial institutions are typically among the first to release profit reports each quarter. Given the banking industry’s close ties to markets and customers’ finances, the impact of this group on the overall economy is closely watched. “Bank earnings are always a useful way to take the pulse of the economy and consumers, especially as it relates to credit use and repayments,” said Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management. “Big banks often give us insight into more Consumer-oriented companies, which report earnings later in the earnings season, generally bode well for companies that sell directly to consumers. With that in mind, CNBC Pro on Finance. Combing Wall Street research ahead of the industry report for views on stocks, Citigroup Inc. is gaining traction among the biggest banks, with Wells Fargo analyst Mike Mayo naming Citi as his top pick in a report. And said Jane Fraser’s bank was entering a “new era”. He said the bank is one of the banks whose net interest income will benefit most from the recent rise in Treasury yields. Net interest income is the difference between the interest income a bank earns on its assets and the interest it must pay on its deposits. The reference to a new era is a nod to Fraser’s four years of leading and transforming the bank since taking over as chief executive in early 2021. It should be doubled within three years. “The transformation at Citigroup is just beginning,” Mayo said Monday on CNBC’s “Closing Bell.” At the same time, Morgan Stanley analyst Betsy Graseck also listed Citi as her top pick and said the stock is a weapon for a rebound in the capital market. Grasek also named Citi as her top pick in the sector, saying she expects investment banking revenue to rise 37% annually, higher than the bank’s own forecast. Grasek said higher net interest income and service fees should push fourth-quarter earnings per share to $1.24, slightly above Wall Street consensus. Investors can also expect Citigroup to report before the market close on Wednesday that it will accelerate the pace of share buybacks in 2025. Citigroup shares surged nearly 37% in 2024, outperforming both the S&P 500 Index and the SPDR S&P Bank ETF (KBE). Wall Street sees more upside ahead. Typical analysts surveyed by London Stock Exchange Group (LSEG) have a buy rating on Citi, with a price target suggesting the stock could rise nearly 20% over the next 12 months. Regional investments Beyond the biggest banks, Wall Street is favoring Minneapolis-based U.S. Bank, which reports earnings Thursday before the market opens. Morgan Stanley’s Graseck ranked it as the “most popular” name ahead of the earnings release. Piper Sandler analyst R. Scott Siefers upgraded USB to overweight from neutral on Monday. USB 1Y mountain US Bancorp, 1-Year Siefers calls US Bancorp “a value name positioned to post some dazzling returns this earnings season.” While Sievers said USB has fallen out of favor in recent years, he said the bank is at an inflection point that should allow it to provide continued positive operating leverage. Unlike Citi, US Bankcorp underperformed both the S&P 500 and the SPDR Bank ETF in 2024, when the index gained 10.5% (excluding the 4.2% ongoing dividend). Still, it marked an improvement from a 1% decline in 2023, when the regional banking crisis erupted, and a 22% decline in 2022, when the Fed began tightening credit. Wall Street’s outlook for the future is more optimistic. Analysts surveyed by LSEG give USB a Buy rating on average, and like Citigroup, the consensus price target suggests the stock could rise nearly 20% next year.
