Morgan Stanley analyst Betsy Graseck increased her 2012 and 2013 earnings estimates and 12-month target prices for Bank of America (BAC) Citigroup (C), J.P. Morgan (JPM) and Goldman Sachs (GS). Yet maintained an Equal Weight rating on all but J.P. Morgan, a best-in-class name that she sees taking market share and completing $12 billion in buybacks this year.
In a note out today, Graseck writes that she adjusted her numbers given that valuations are no longer subject to quite as much regulatory overhang and to account for greater risk-taking sentiment in the market. She writes:
Risk on trade drives upside to capital markets firms as we raise 1Q12 EPS estimates by 42% and raise 2012 estimates by 14%. Stronger flows and positive marks dominate but expect q/q growth rates to fade as spreads stabilize. Expect better markets to drive stronger underwriting volumes into 2q12.
Extra boost from continued consumer credit improvement (in particular credit card). Harp 2 driving up refis, is a big benefit to large mortgage servicers while long-end volatility not a meaningful concern for us. Expect servicers to absorb through incrementally thinner gain on sale spread, which is near historic highs.
J.P. Morgan, Citigroup and Goldman Sachs were all up about 1% just before the close, while Bank of America was off 2.8%.
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