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NEW YORK (
TheStreet) -- Earnings for companies listed in the S&P 500 Financial Sector are expected to rise this year an average of 21.58%, according to Capital IQ Estimates.
Among the list,
E*Trade Financial(ETFC - Get Report) ranked highest in terms of expected increase to earnings. E*Trade's full-year EPS estimates are expected to rise 1,618.8%, to 55 cents a share, from the estimated 3 cents a share it is likely to post for 2010 earnings, the data says.
Regional banks including
Comerica(CMA - Get Report),
Huntington Bancshares(HBAN - Get Report),
Fifth Third(FITB - Get Report) and
Keycorp(KEY - Get Report) round out the top five financial companies whose earnings are expected to rise the most this year, the data says.
TheStreet ran its own screen through
SNL Financial to determine which bank holding companies are predicted to post the highest earnings growth over the next 12 months. The estimates are as of Dec. 31.
Not surprisingly, the list is mainly large and mid-size regional banks that will benefit from improved credit leverage.
"It's credit leverage off a low base -- that is the story," says Andrew Marquardt of Evercore Partners. "It's all continuing improvement in charge offs and reserve releases, modest revenue growth, and lower expenses. However, it is mostly credit related."
It's also no secret that revenue growth will remain challenging for banks this year, due to a confluence of factors.
"Although we expect the quality of banks' balance sheets to improve, we also believe revenue growth will be challenging, down 1%, given the
limited loan demand and challenging yield curve environment," Keefe, Bruyette & Woods analysts wrote in their 2011 Large-Cap Bank Outlook last month.
Of banks listed in the KBW Bank Index,
Regions Financial(RF - Get Report),
Zions(ZION - Get Report),
M&T Bank(MTB - Get Report), KeyCorp, Fifth Third,
SunTrust Banks(STI - Get Report) and
Marshall & Ilsley(MI) still have yet to repurchase the preferred stock held by the U.S. Treasury Department under the Troubled Asset Relief Program.
That means investors will see more capital raises by banks in 2011 in order to repay the funds and keep capital levels satisfactory for regulators at the same time. Earnings (and correlating estimates) will also be affected by banks' share counts.
Other than credit, analysts are incorporating banks' to experience net interest margin improvement, as loan growth inches forward in select sectors, and deploy capital in the form of share buybacks and dividend raises.
However, 2011 is still primarily going to be a year in which banks continue to slog through their balance sheets. Marquardt notes that even 2012 will have a meaningful degree of credit leverage still incorporated into earnings estimates.
"The question is how much and how quickly does [credit] turn and that's really going to be the driver of earnings in the near term," Marquardt says. "As we get closer to 2012, that's the year we'll start to see a run rate for normalized earnings."
TheStreet's list as follows, in order of ascending order: