Analyst notes

Barclays expects bank stocks to "outperform" in 2022, analysts wrote in a recent sector-outlook report.

Despite some near-term uncertainties brought by the Omicron variant, the analysts foresee positive trends including loan growth, net interest margins benefiting from higher interest rates and low deposit betas, among others.

"While the pace of loan loss reserve releases should continue to abate and loan loss provisions have an upward bias from historically low levels, we expect the normalization of loan losses to occur at a measured pace," the analysts wrote.

On the challenges front, the analysts took note of potential disruptions caused by COVID-19, and the trajectory of Fed Funds and intermediate rates along with their impact on the economy and inflation.

The analysts made Charlotte, N.C.-based Bank of America Corp. their top pick.

In addition, the analysts made several ratings changes.

Upgrades

Barclays analysts upgraded San Francisco-based Wells Fargo & Co. and Pittsburgh-based The PNC Financial Services Group Inc. to "overweight" from "equal weight."

The analyst wrote that they expect Wells Fargo to benefit from progress on its regulatory issues, expense saving opportunities and above average excess capital.

The price target was changed to $62.00 from $50.00. The EPS estimates for 2022 and 2023 were raised to $4.05 and $5.00 from $3.75 and $4.41, respectively.

For PNC, the report said, "Relative to USB, and others, we believe PNC has more interest rate sensitivity and will benefit sooner from acquisition related synergies."

The price target was raised to $250.00 from $220.00. The EPS estimates for 2022 and 2023 were raised to $14.50 and $16.10 from $14.25 and $15.64, respectively.

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Barclays analysts also upgraded Birmingham, Ala.-based Regions Financial Corp. to "equal weight" from "underweight."

The price target was kept unchanged at $26.00. The EPS estimates for 2022 and 2023 were changed to $2.15 and $2.25 from $2.20 and $2.21, respectively.

Downgrades

Among the downgrades by Barclays, the analysts downgraded Minneapolis-based U.S. Bancorp from "overweight" to "equal weight."

The price target was kept unchanged at $68.00. The EPS estimates for 2022 was kept unchanged at $4.50, while that for 2023 was raised to $5.20 from $5.16.

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Lastly, the Barclays analysts downgraded Columbus, Ohio-based Huntington Bancshares Inc. to "underweight" from "equal weight."

The price target was kept unchanged at $17.00. The EPS estimates for 2022 and 2023 were raised to $1.50 and $1.65 from $1.45 and $1.50, respectively.

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Wolfe Research analyst Steven Chubak downgraded New York-based JPMorgan Chase & Co. to "peer perform" from "outperform."

"JPM risk-reward is more balanced as the threat of tougher reg./higher capital minimums, and expense growth are not adequately reflected in cons," the analyst said.

The updated price target was $185.

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Stephens analyst Vincent Caintic downgraded Stamford, Conn.-based Synchrony Financial to "equal-weight" from "overweight."

"[W]hile we have a negative view of Buy Now Pay Later economics, we do think the growth of that industry will negatively impact private label credit card margins which are competing for merchant retention and new account wins," Caintic said.

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Wells Fargo analyst Jared Shaw downgraded Kansas City, Mo.-based UMB Financial Corp. to "equal weight" from "overweight" on the view that its stock is "fairly valued."

"Going forward, as expectations for group loan growth in 2022 and 2023 accelerate, UMBF will likely not be a positive outlier, limiting upside surprises," Shaw said.

The price target was reduced to $110 from $115. The EPS estimates for 2021 and 2022 were kept unchanged at $7.57 and $6.89, respectively.

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Wells Fargo analyst Jared Shaw downgraded Portland, Ore.-based Umpqua Holdings Corp. to "equal weight" from "overweight."

Shaw said that while Umpqua is likely to be stronger after its deal with Columbia Banking System Inc., he believes the bank will remain "internally focused in 2022," and the shares are unlikely to see much valuation expansion until deal integration is completed.

"Additionally, UMPQ has only average asset sensitivity, but a much higher dependence on mortgage banking than peers, so earnings growth is likely to underperform peers as rates rise," Shaw said.

The price target was reduced to $20 from $24. The EPS estimates for 2021 and 2022 were kept unchanged at $1.94 and $1.50, respectively.