The Federal Reserve’s decision to combat inflation by raising benchmark interest rates is a significant tailwind for the banking and financial sector since a considerable portion of its revenue is positively correlated with interest rates. Also, improving economic conditions should help banks and financial institutions see business growth in this year.

Further, banks and financial institutions are digitizing their operations to meet the evolving needs of consumers and to compete with fintech companies.

Given this backdrop, Wall Street Analysts expect the stocks of fundamentally sound banks JPMorgan Chase & Co. (JPM), Citigroup Inc. (C), and UBS Group AG (UBS) to deliver  solid upside in the coming months.

JPMorgan Chase & Co. (JPM)

JPM functions as a financial services company worldwide. It operates through four segments: Consumer & Community Banking (CCB) deposit, which offers investment and lending products; Corporate & Investment Bank (CIB), which provides banking products and services; Commercial Banking (CB), which provides financial solutions that include lending, payments, investment banking, and asset management; and Asset & Wealth Management (AWM), which offers multi-asset investment management solutions.

JPM recently announced its agreement to acquire Global Shares, a leading cloud-based share plan management software provider. Global Shares’ employee ownership solutions cover the entire company lifecycle and serve corporates worldwide. “The addition of Global Shares is complementary across our entire J.P. Morgan franchise from new client acquisition for our Global Private Bank and U.S. Wealth Management businesses to providing new, innovative capabilities to private and public companies globally and helping their employees manage their wealth,” said Mary Callahan Erdoes, CEO, J.P. Morgan Asset & Wealth Management.

JPM’s net revenue amounted to $30.35 billion for the fourth quarter, ending Dec. 31, 2021. Its net income was  $10.40 billion, while its EPS amounted to $3.33.

Analysts expect JPM’s revenue to increase 1.8% year-over-year to $123.82 billion for its fiscal year 2022. The company’s EPS is expected to grow 10.5% year-over-year to $12.27 for its fiscal year 2023. Also, it has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each  of the trailing four quarters.

Among the 18 Wall Street analysts that rated the stock, nine rated it buy, and eight rated it hold. The 12-month median price target of $176.33 indicates a 27.4% potential upside. The price targets range from a low of $141.00 to a high of $200.00. The stock closed its last trading session at $138.40.

Citigroup Inc. (C)

C is a diversified financial service holding company that offers various financial products and services to consumers, corporations, governments, and institutions. Global Consumer Banking (GCB) and Institutional Clients Group (ICG) are its two operational segments. The GCB segment provides traditional banking services to retail customers, and the ICG segment offers wholesale banking products and services.

In January, Brooks Brothers, the country’s oldest clothing retailer, and Citi Retail Services, one of the largest and most experienced retail credit solution providers in North America, announced a multi-year extension of their consumer credit card relationship. The agreement should help the two brands to strengthen their relationship and enable a continuing alignment of goals, including a steady commitment to drive omnichannel engagement and build multi-generational customer relationships.

During the fourth quarter, ending Dec. 31, 2021, C’s total revenue increased 1.1% year-over-year to $17.02 billion. The company’s EBT amounted to $3.95 billion, while its net income came in at $3.17 billion. The company reported an EPS of $1.46 over the period.

C is expected to generate $72.11 billion in revenue growth, representing 0.3% year-over-year growth for its fiscal 2022. The $8.01 consensus EPS estimate for its fiscal year 2023 indicates an 8% improvement year-over-year. In addition, the company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters.

Among the 19 Wall Street Analysts that rated the stock, 10 rated it buy, and nine rated it hold. Closing its last trading session at $56.80, the 12-month median price target of $74.290 indicates a 30.8% potential upside. The price targets range from a low of $60.00 to a high of $107.00.

UBS Group AG (UBS)

UBS offers financial advice and solutions to private, institutional, and corporate clients worldwide. It operates through four divisions: Global Wealth Management; Personal & Corporate Banking; Asset Management; and Investment Bank.

In January, UBS and Wealthfront, an automated wealth management provider that serves the next generation of investors, agreed to UBS’ acquisition of Wealthfront in an all-cash transaction valued at $1.4 billion. This acquisition should enable UBS to accelerate its growth in the U.S. and broaden the firm’s reach among affluent investors and expand its distribution and capabilities.

In the fourth quarter, ended Dec. 31, 2021, UBS’ total operating income increased 7.6% year-over-year to $8.73 billion. Its operating profit amounted to $1.73 billion, while its net profit came in at $1.35 billion.

The consensus EPS estimate for fiscal 2022 represents 6.9% year-over-year growth to $2.25. Analysts expect its revenue to increase 2.4% year-over-year to $35.55 billion for its fiscal year 2023. In addition, it has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters. The stock has gained 16.6% in price over the past year and 11.7% over the past nine months.

Among the 11 Wall Street Analysts that rated the stock, nine rated it buy, and two rated it hold. The 12-month median price target of $25.48 indicates a 40.9% potential upside. The price targets range from a low of $20.30 to a high of $52.68. The stock closed its last trading session at $18.08.

JPM shares were trading at $138.84 per share on Thursday afternoon, up $0.44 (+0.32%). Year-to-date, JPM has declined -11.79%, versus a -7.89% rise in the benchmark S&P 500 index during the same period.

About the Author: Spandan Khandelwal

Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing. More...

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