JPMorgan and BNY Upgraded, Citi and State Street Cut at Keefe Bruyette

Keefe Bruyette upgrades JPMorgan and BNY Mellon and cut ratings on Citigrpup and State Street. The analysts say banks will feel different degrees of pain from the economic turmoil coming out of the coronavirus pandemic.
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Analysts at Keefe, Bruyette and Woods shuffled their grades and cut their price targets on a number of the big banks.

The analysts at the Stifel subsidiary, led by Brian Kleinhanzl, upgraded JPMorgan Chase  (JPM) - Get Report and Bank of New York Mellon  (BK) - Get Report to outperform from market perform. 

They downgraded Citigroup  (C) - Get Report and State Street  (STT) - Get Report to market perform from outperform.

Regarding JPMorgan, “investors can justify owning it at the current valuation, given it is a high-quality franchise where returns over the cycle should be stronger than peers,” the analysts said.

“We view JPM as a firm that can use the company’s balance sheet to gain market share and come out of the recession stronger.”

When it comes to BNY Mellon, “we see its earnings as being more resilient than peers, and we favor BK’s exposure to fixed-income markets as opposed to other companies that are more exposed to equity markets at this point,” the analysts said.

What of Citigroup? “[A]lthough we find the current valuation compelling, we believe that Citi has elevated risks outside the U.S.,” the analysts wrote.

“And we are less certain on the path and ultimate damage of Covid-19 on global supply chains and on the impact to Citigroup’s revenue growth.”

And as for State Street, “the company will see earnings pressure from lower rates and lower equity-market returns [and] there is downside risk to our estimates should equity markets fall further,” the analysts said.

They lowered their share price targets as follows: BNY Mellon to $46 from $49, Citigroup to $54 from $91, JPMorgan to $120 from $142, and State Street to $61 from $93.

At last check, BNY Mellon traded at $32.45, down 3.6%; Citigroup at $39.38, down 6.5%; J.P. Morgan at $85.26, down 5.3%; and State Street at $49.83, down 6.5%.