It’s always interesting to see how the banks rate each other. Often, the equity researchers for firms will publish news upgrading or downgrading key rivals, which always begets the question – how was this determined, and is it unbiased?
Today, Goldman Sachs (NYSE: GS) analyst Richard Ramsden wrote a research paper that indicated Citigroup (NYSE: C) and JPMorgan Chase (NYSE: JPM) are on Goldman’s ‘favorite ideas’ list going into third quarter earnings results.
Ramsden supports his argument for Citigroup citing the fact that the firm is trading at just 97% of book value. In addition, his earning target for JPMorgan is above the consensus estimates for the third quarter, which could leave investors pleasantly surprised next week. Ramsden expects JPMorgan to earn 93 cents per share, compared to the consensus estimate of just 88 cents.
In Ramsden’s September 22 report, he wrote that Citigroup, JPMorgan, and Bank of America are attractive in 2011 price to earning ratios. Further, he believe that JPMorgan is very likely to return capital to shareholders, and is anxiously awaiting the opportunity to increase it’s dividend.
As we enter earnings season, all eyes will be turned to the financial markets, and the performance of the banks once again. As third quarter coincides with the traditionally weak retail brokerage volume month of August, and trading volumes have subsided, expectations are generally negative. However, if the results are not as negative as expected, as Alcoa showed last night, we may be in for a nice uptick in the market.
