Bank earnings are coming up, and Barclays senior equity analyst Jason Goldberg joins Market Domination to discuss navigating the banking sector amid economic uncertainty.
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I'm just curious, you know, broadly, how valuations look across your coverage universe.
No, you know, looking out valuations, I think continue to be attractive. You're at about two multiple point discount on a PE basis historical averages, you know, price tangible book basis, a little bit below historical averages. Um, and if we can get through some of these uncertainties, you know, things like loan growth and investment banking fees, you know, should come back. I think just corporates are hesitant at the moment. Um, you know, maybe next week we'll get some clarity on tariffs. Um, you know, looking out, you know, there's hope for some tax reform. Um, and as corporates kind of figure out, you know, the game they're playing, they could, you know, adapt and invest in their businesses.
And so, Jason, does that imply how does that imply your feelings about some of these big money center banks that also have big robust investment banking operations versus say the regional banks?
Yeah, I I would say, you know, at the moment, you know, maybe a bit biased towards, um, you know, the bigger banks because they do have the benefit of, um, you know, the trading activity. Um, and another consideration is, you know, we do think, you know, once this administration kind of figure out tariffs, you know, they're going to, you know, the next thing to focus on is deregulation. And it, you know, it's true for we think for all industries, um, particularly for banks after kind of 15 consecutive year now of increasing capital requirements and other regulatory obligations. Um, you know, there is an ability to take a more pragmatic approach and a holistic approach to some of those things. And we think as that becomes clearer, you know, the biggest banks which were most adversely impacted, you know, have a lot to gain there.
You know, Jason, you mentioned, um, IPOs a second ago. You know, obviously core weave making its public debut today. I'm just curious to get your thoughts on the IPO market 2025, Jason, whether, you know, you're optimistic or skeptical, and to the extent that you are optimistic, which names that you cover are sort of best position to capitalize?
Yeah, you know, certainly coming into the year, you know, if you look at IPO pipelines were fairly, um, robust both, um, you know, from in partnerships and by sponsors as well as companies just looking to, you know, go public. And, you know, while maybe, you know, the first quarter got off to a little bit slower start than anticipated, you know, we we think once we, you know, the market kind of figures out what's going on with respect to some of these macro issues, um, you know, there's still room for a fair amount of activity to pick up. You know, in our coverage, you know, Goldman Sachs and Morgan Stanley are probably most geared for that. Um, and it's certainly something that we're watching closely.
Um, so would you say they're your favorites going into earnings? Where do you think investors should be looking?
Yeah, you know, I think, you know, earnings are certainly kind of always, you know, a bit choppy, and we think this quarter will be no different. You know, the answer you talked about maybe softening consumer spending. You know, some of the sentiment disease, um, have, you know, shown some signs of degradation. And and quite frankly, the outlook for the economy, whether it's GDP growth or unemployment, you know, has, um, deteriorated somewhat. So you have to be mindful of what, you know, loan loss provisions, um, will ultimately look like. Um, but you know, looking out over the course of the year, you know, the bigger banks, whether it's Bank of America, JP Morgan, you know, Citi Group, you know, we talked about Goldman Sachs, Morgan Stanley, you know, we do think could do well, um, you know, with, you know, probably momentum picking up in the back half of the year.
You know, Jason, I'm just looking. I I see only two underweights, my friend, in your coverage universe. I see Zions Bank Corp and Regions Financial. Why are you telling clients those are sells?
Yeah, we have a couple in there. You know, just listen, I think in the current environment we're paying a bit more attention, you know, to credit quality. Um, and if you look at a name like a Zions has had a pretty the sharpest increase in the last two quarters, um, with respect to criticized classified loans. So that's something we're keeping an eye on. You know, Regions, you know, they tend to have, if you kind of look at their customer base, um, they're more focused on the lower end consumer. And if you think about, you know, the current landscape, elevated inflation, still high interest rates, um, they're going to be most adversely impacted there. Um, you know, then Comerica's kind of the most exposed bank we cover to C&I lending, you know, which is an area that, you know, has been, you know, under pressure in the last several quarters. And if you can kind of look at data so far this first quarter, you know, it continues to be subdued. So kind of just some idiosyncratic things we're keeping an eye on.
Jason, always great to see you. Appreciate your time and those picks.
My pleasure. Have a good weekend.
You too. You too.
