Key Takeaways
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Since March 2022, the U.S. Federal Reserve has hiked its benchmark rate 10 times and recently raised its target federal funds rate yet again to 5.25-5.5%. Although inflation in the U.S. has started to cool, it remains well above the Fed’s 2% target. Higher interest rates have made borrowing more expensive and saving more attractive to depositors. The desire to earn higher returns on savings is seeing depositors move away from non-interest-bearing accounts.
Here, we take a look at analysts’ expectations for the top five U.S. national banks: JPMorgan Chase (NYSE: JPM), Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC), Citigroup (NYSE: C), and PNC (NYSE: PNC). We also look at leading U.S. regional banks: KeyCorp (NYSE: KEY), Truist Financial (NYSE: TFC), Fifth Third Bancorp (NASDAQ: FITB), and Capital One Financial (NYSE: COF).
From recent earnings releases, the top five U.S. national banks saw non-interest-bearing deposits collectively decline by $108 billion in 2Q 2023. Analysts expect these deposits to continue to decline in the coming quarters, albeit less aggressively. Based on Visible Alpha consensus, non-interest-bearing deposits are collectively projected to decrease by 13% year-over-year for these banks in 2023.
Figure 1: YoY Change in Non-Interest-Bearing Deposits
Note: YoY growth calculated based on the quarterly aggregates of average non-interest-bearing deposits for JPMorgan Chase (NYSE: JPM), Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC), Citigroup (NYSE: C), PNC (NYSE: PNC), KeyCorp (NYSE: KEY), Truist Financial (NYSE: TFC), Fifth Third Bancorp (NASDAQ: FITB), and Capital One Financial (NYSE: COF).
The chart below highlights analyst expectations for the average growth of non-interest-bearing deposits in 2023:
Figure 2: 2023 Expectations for Non-Interest-Bearing Deposits
In contrast, interest-bearing deposits are seeing steady growth as institutional investors move their funds away from non-interest-bearing accounts towards those that offer higher yields. Average interest-bearing deposits collectively increased by $75 billion for the nine banks in 2Q 2023 from 1Q 2023.
Figure 3: YoY Change in Interest-Bearing Deposits
Note: YoY growth calculated based on the quarterly aggregates of average interest-bearing deposits for JPMorgan Chase (NYSE: JPM), Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC), Citigroup (NYSE: C), PNC (NYSE: PNC), KeyCorp (NYSE: KEY), Truist Financial (NYSE: TFC), Fifth Third Bancorp (NASDAQ: FITB), and Capital One Financial (NYSE: COF).
The chart below highlights analyst expectations for the average growth of interest-bearing deposits in 2023:
Figure 4: 2023 Expectations for Interest-Bearing Deposits
The shift towards interest-bearing deposits is expected to lead to a steady rise in funding costs for the leading banks. Based on Visible Alpha consensus, analysts project increases throughout 2023, as borrowing costs and deposits surge while loan volumes diminish. The cost of funds is projected to ease starting in 2025.
Figure 5: Cost of Funds Projections for Major Banks
LVMH Asia Revenue Growth to Rebound; Non-Combustibles to Boost Philip Morris; Chubb’s Agricultural Segment Growth Slowing
By: Visible Alpha Research & Innovation Lab
In our weekly round-up of the top charts and market-moving analyst insights: LVMH’s (EPA: MC) revenue growth in Asia is expected to rebound; Philip Morris International (NYSE: PM) is poised to see significant growth in non-combustible products; Chubb’s (NYSE: CB) North America agricultural segment is facing a slowdown in growth.
Analysts Expect LVMH’s Revenue Growth in Asia to Rebound in 2023
Analysts expect LVMH’s (EPA: MC) revenue growth in Asia to rebound in 2023, buoyed by the late-2022 lifting of anti-Covid measures in China. Based on Visible Alpha consensus, LVMH’s revenue in Asia (excluding Japan) is expected to be up nearly 19% year over year in 2023, reaching €28 billion. This comes after only around 6% revenue growth in the previous year.
2023 revenue in Asia, with Japan included, is also expected to be up nearly 19% year over year, followed by Europe at almost 10%. LVMH’s strong recovery in China is also expected to benefit revenue growth for the luxury goods conglomerate’s fashion and leather goods division, which is projected to grow 13% year over year in 2023, and selective retailing division, projected to grow 16%.
Philip Morris’s Non-Combustible Products Poised for Robust Growth
Philip Morris International (NYSE: PM) is poised to see significant growth in its non-combustible tobacco products, according to Visible Alpha consensus. While the net revenue from the company’s combustible tobacco products (cigarettes), has either remained stagnant or declined in recent years, revenue generated by non-combustible alternatives, such as e-cigarettes, heat-not-burn (HNB) tobacco products, and nicotine pouches, has been increasing rapidly.
Analysts anticipate 36% year-over-year growth in net revenue for non-combustible products this year, in stark contrast to less than 1% growth projected for combustible products. Revenue from non-combustibles is expected to surpass that of combustibles by 2026.
Chubb’s North America Agricultural Segment to Face Slower Growth, Say Analysts
Analysts project a deceleration in the growth rate of net premiums earned by property & casualty insurance giant Chubb (NYSE: CB) within its North American agricultural division during the forecasted period, according to Visible Alpha consensus.
This slowdown in growth is influenced by several factors, including climate volatility and its impact on crop productivity; and given that Chubb’s agricultural segment falls under the federally subsidized crop insurance program, the insurer is limited in its ability to impose higher premiums on agricultural insurance policies.
TurboTax Accelerates; Crypto Rally Fails to Boost Coinbase; HOKA to Outpace UGG
By: Visible Alpha Research & Innovation Lab
In our weekly round-up of the top charts and market-moving analyst insights: Coinbase’s (COIN) trading volume is expected to remain low despite the crypto rally; Intuit’s (INTU) TurboTax may break its sales record this year; Samsung’s DRAM bit shipments are estimated to fall after production cuts were announced; HOKA is set to outpace UGG as Deckers Outdoor’s (DECK) top-selling brand; and analysts predict Topgolf will drive MODG sales growth through 2025.
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Property and Casualty Insurance: In the Eye of the Storm
By: Erin Gifford
When the pandemic first hit, property and casualty (P&C) insurance companies were called to rise to the occasion. Thankfully, crisis management is the insurance industry’s bread and butter – these are the moments they prepare for and help others to navigate.
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The U.S. Bureau of Labor Statistics published new inflation numbers recently; consumer prices eased to 8.3% in August after climbing 9.1% in June 2022 from the prior year, the highest inflation rate in the U.S. since 1981. To curb inflationary pressures, the Federal Reserve hiked interest rates by 75 basis points in September for the third time this year, to a 3%-3.25% range. In an environment of high inflation, subsequent rising interest rates, and recessionary fears, we look at the top 10 U.S. banks by net loans – JP Morgan & Chase (JPM_US), Bank of America (BAC), Wells Fargo (WFC_US), Citi Group (C_US), US Bancorp (USB_US), Truist Financial Corporation (TFC), PNC Financial Services (PNC), First Republic Bank (FRC_US), Citizens Financial Group (CFG), and M&T Bank (MTB_US) – as they come out of 2Q FY22 earnings.
Buybacks Today Form A Larger Part of Aggregate Payouts – Part 3
By: Erin Gifford
This is the third part and final part of this series.
In the U.S., publicly traded companies routinely reward shareholders with cash payouts. There are two types of common payout vehicles:
- Cash dividend per share
- Share repurchases
Buybacks Today Form A Larger Part of Aggregate Payouts – Part 2
By: Erin Gifford
This is the second part of a three-part series.
In the U.S., publicly traded companies routinely reward shareholders with cash payouts. There are two types of common payout vehicles:
- Cash dividend per share
- Share repurchases
Buybacks Today Form A Larger Part of Aggregate Payouts
By: Erin Gifford
This is the first part of a three-part series.
In the U.S., publicly traded companies routinely reward shareholders with cash payouts. There are two types of common payout vehicles:
- Cash dividend per share
- Share repurchases
“Transitory” Inflation Meats Reality
By: Erin Gifford
With markets showing high levels of volatility and the Federal Reserve discussing the possibility of raising rates several times this year, investors continue to be hyper-focused on where inflation will land over the next several months. Read more
Covid-19 Impact on Global Bank Asset Quality Trends
By: Erin Gifford
In this analysis, we looked at asset quality trends for publicly traded banks around the world and Covid-19 pandemic’s impact on the industry, providing an overview of recent performance and a deep dive into future expectations. We found that non-performing loans (NPLs) are on the rise, and banks are building reserves to support the rising NPLs. In addition, we found that there is a wide variation by region in trends in bank asset quality due to government and central bank responses to Covid-19.
