“Given the weak growth prospects, at least near-term, bank stocks are likely to underperform coming out of the quarter,” Sterne Agee said.
Yet some Wall Street analysts have hope that large lenders like Citigroup can turn things around. [Financial ETFs Caught in Downdraft.]
“While investor expectations have been further scaled back, the slow economic recovery and persistent uncertainty surrounding financial reform and required capital levels have clearly weakened investor appetites for bank stocks,” Sterne Agee noted.
“While underlying credit quality will continue to improve, the pace of improvement will likely slow for many banks as the early success resolving problem construction loans and card portfolios will likely become more muted by ongoing stress in both residential consumer and commercial real estate,” the analysts wrote. “At the same time, lackluster loan growth, declining margins, weak fee income and regulatory reform suggest pre-provision profits will be lackluster at best for some time to come.”