Wall Street veteran Mike Mayo is sticking to his bullish call for U.S. banks this year. It’s just the on-again, off-again swings of American trade policy of late are going to hurt the group’s earnings in the near term.
The Wells Fargo analyst trimmed his earnings estimates by an average of 4% across the board Thursday, noting company outlooks would be tricky to establish amid “a degree of paralysis from policy uncertainty.”
Dealmakers were gearing up for a bumper year under the new administration. Instead they’ve crashed into the harsh reality of President Donald Trump’s market-rattling trade wars and geopolitical clashes. Amid all the anxiety about the economic and inflationary impacts Wall Street’s money machine, lucrative mergers and acquisitions, have slowed while initial public offerings have disappointed.
That’s driving Mayo to take a more conservative view on investment banking, loans, fixed asset repricings and reserves.
“The policy uncertainties are testing our conviction and making us think that the delay has a chance to be longer than expected with the chance of a ‘super cycle’ more remote,” he wrote. Meanwhile, the KBW Bank Index is on track for a more than 5% decline for the first quarter of 2025, its worst since the regional banking crisis in March 2023.
Still, Mayo held onto his rosy longer-term view on what he expects to be the biggest deregulation push in a generation. “Despite lower estimates, we continue to think that a capital markets rebound is delayed and not dead.”
Among individual banks he favors Citigroup Inc. and JPMorgan Chase & Co. as his top picks. JPMorgan in particular “should benefit from volatility given its role as market facilitator, likely helping trading,” he wrote.
JPMorgan, Wells Fargo & Co. and Morgan Stanley will kick off the quarterly earnings for the biggest U.S. banks on April 11.
