These 20 banks have had the largest cuts to earnings estimates

Below is a list of banks whose consensus earnings estimates have been cut the most by analysts this year, followed by another list of the banks that analysts rate most highly.

To give you an idea of what a difficult environment the industry faces, the following chart shows the changes to earnings estimates for the six largest U.S. banks, by total assets, among analysts at Keefe, Bruyette and Woods, led by David Konrad. KBW’s revised estimates and price targets were published on Wednesday.

Here are KBW’s earnings-per-share estimates for the six banks by total assets for 2023 and 2024:

Downward revisions for banks’ earnings estimates may not come as a surprise. The industry’s margins are being squeezed as savers move money to earn better interest rates on deposits. But the 2024 EPS estimates are lower than the 2023 estimates for three of the banks, which can add downward pressure for the stocks.

Here are KBW’s revised price targets for the group and this year’s total returns (with dividends reinvested) for the stocks:

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These banks have had the largest cuts to consensus earnings estimates this year

For a broader look at the industry, we looked at the largest 50 banks by total assets in the Russell 3000 Index
RUA,
-0.10%,
which is designed to represent about 98% of companies listed publicly in the U.S., by market capitalization.

To define whether or not a company would be considered a bank, we included companies that file regulatory call reports as banks or bank holding companies or savings and loan holding companies (such as Charles Schwab Corp.
SCHW,
+1.48%
).

Here are the 20 banks for which consensus 2023 earnings estimates among analysts polled by FactSet have declined the most since the end of last year:

PacWest Bancorp
PACW,
+0.88%
leads the list as the only bank among the largest 50 expected to show a net loss for 2023. The bank has been working to improve its liquidity through asset sales, most recently announcing a deal to sell a loan portfolio to Ares Management Corp.
ARES,
+1.17%.

Thinking positively: Here are analysts’ favorites among the largest 50 banks

Going back to our list of the top 50 U.S. banks by total assets, 10 of them are rated buy or the equivalent by at least 75% of analysts polled by FactSet. Here they are, sorted by the 12-month upside potential for the stocks, based on consensus price targets:

Any stock screen should only be a starting point for your own research if you are considering investing in any of the banks listed here.

For this group of 10 bank stocks favored by analysts, let’s end by showing this year’s changes in consensus earnings estimates:

The large increase in EPS estimates for First Citizens BancShares Inc.
FCNCA,
+1.65%
of Raleigh, N.C., reflects its lucrative deal to acquire the failed Silicon Valley Bank from the Federal Deposit Insurance Corp.