JPMorgan Chase (JPM) - Get JPMorgan Chase & Co. (JPM) Report and Wells Fargo (WFC) - Get Wells Fargo & Company Report shares dropped more than the overall market Thursday, despite upgrades of the two banking giants from Wolfe analyst Steven Chubak.
The analyst's move comes as a prelude to the banks' second-quarter earnings reports, which are both expected July 14.
Chubak lifted his rating to outperform for JPMorgan and peer perform for Wells Fargo, based on months of their share prices trailing Goldman Sachs (GS) - Get Goldman Sachs Group, Inc. (GS) Report and Morgan Stanley (MS) - Get Morgan Stanley (MS) Report and on an improving outlook for loans.
JPMorgan shares have been “abandoned for no good reason,” he said in a commentary.
As for Wells Fargo, it has “fewer negative catalysts” coming, as its problems with fee income, expenses and dividend cuts are well known.
Meanwhile, Wells Fargo may slash tens thousands of jobs starting later this year, knowledgeable sources told Bloomberg.
Cost-cutting pressures could spark the move. Despite Chubak’s enthusiasm, some analysts are concerned about forecasts that Wells Fargo will report its first quarterly loss in more than a decade next week.
Chubak said he’s “growing more lukewarm” on trust banks, and more cautious on buyout shops. He lowered Evercore (EVR) - Get Evercore Inc Class A Report and State Street’s (STT) - Get State Street Corporation Report ratings to peer perform and Northern Trust (NTRS) - Get Northern Trust Corporation Report to underperform.
Lessened worries about credit conditions amid the flood of liquidity from the Federal Reserve make trust banks less compelling, Chubak said.
JPMorgan recently traded at $91.41, down 2.03%, compared to a 1.2% decline for the S&P 500. Wells Fargo traded at $23.99, down 2.28%.
JPMorgan has slid 34% year to date, and Wells Fargo has plunged 55%.