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9 Q1 Bank Stock Picks from Barclays

NEW YORK ( TheStreet) -- Barclays Capital published a massive first-quarter preview on bank stocks and the team of analysts led by Jason Goldberg has a positive view on large-cap banks and is neutral on mid-cap names.

The report notes that bank stocks have trailed the market going into earnings season this quarter -- in contrast to the last five quarters -- and despite generally positive results from the Federal Reserve Comprehensive Capital Analysis & Review, better known as the stress test, conducted on the largest 19 U.S. bank holding companies.

Many banks, including Wells Fargo (WFC - Get Report), JPMorgan Chase (JPM - Get Report), U.S. Bancorp (USB - Get Report) announced they had gotten the go-ahead for share buybacks and dividend hikes. Even crisis-battered Citigroup (C - Get Report) it would reinstate small shareholder payout of a penny a share.

"Unfortunately, the conversations with investors post that exam quickly shifted toward first quarter earnings expectations, which we view as lackluster, though not surprising," the Barclays report states.

Barclays had been relatively bullish on the banks going into each of the past four quarters, regularly expecting the majority of the names it covers to exceed Wall Street analyst consensus estimates. This time around, banks posting better than expected numbers may be in the minority, Barclays' analysts write.

Adding to the uncertainty quarter has been mixed economic data with positive signs in the employment outlook offset by a still-weak housing market, the report notes.

JPMorgan Chase will start the earnings season Wednesday, with Bank of America (BAC) set to report on Friday, though the busiest days will come Tuesday and Thursday of next week.

Areas Barclays analysts will be watching closely include loan growth, which they expect to be even worse than usual in a seasonally weak first quarter. They expect fee income to show small declines at most banks, though investment banking should be improved over the fourth quarter, particularly for banks with meaningful trading operations like JPMorgan Chase, Bank of America and Citigroup.

Balance sheets should continue to improve, with tangible book value increasing an average of 2%, which Barclays analysts note would be the fifth straight quarter showing improvement in this area. They are also forecasting continued declines in the percentage of loans classified as "non-performing," though they believe commercial real estate will be a problem at many institutions.

Barclays analysts are above consensus on several names that are nonetheless not among their top recommendations. Examples of these include Northern Trust (NTRS), Comerica (CMA) and Fifth Third Bancorp (FITB). Other names they favor are popular with other analysts as well. Here are Barclays' picks.

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