Big banks are reporting quarterly financials this week, the opening salvo in the fourth quarter corporate earnings season. Large financial institutions are typically among the first major companies to deliver their profit reports each quarter. This group is closely watched for tea leaves on the broader economy given banking’s close connection to markets and customer finances. “Bank earnings are always an effective way to get a pulse on the economy and the consumer, especially as it relates to credit usage and repayment,” said Michael Landsberg, chief investment officer of Landsberg Bennett Private Wealth Management. “The big banks often give us a good insight into what we can expect to see from the more consumer-oriented companies, which report earnings later on in earnings season. If credit card usage is up, that typically bodes well for companies that sell directly to consumers.” Given that, CNBC Pro combed through Wall Street research for stock ideas ahead of the financial industry’s reports. Of the biggest banks, Citigroup saw mounting support. Wells Fargo analyst Mike Mayo, in a note naming Citi his top pick, said Jane Fraser’s bank is entering a “new era.” He said it was among the banks whose net interest income stands to benefit most from the recent move up in Treasury yields. Net interest income is the difference between the interest income a bank receives on its assets and the interest it has to pay on its deposits. The reference to a new era is a tribute to the four years Fraser has led and overhauled the bank since taking over as CEO in early 2021. Mayo said Citigroup shares should be able to double in the next three years as investors better understand the impact of the changes Fraser has wrought on its businesses. “The curtain’s just rising on Citigroup changes,” Mayo said on CNBC’s “Closing Bell” on Monday. Morgan Stanley analyst Betsy Graseck, meanwhile, also named Citi her top pick and said the stock was a play on a capital market rebound. Graseck, who also named Citi her top pick in the sector, said to expect investment banking revenues to grow 37% year over year — above the bank’s own forecasts. Graseck said higher net interest income and service fees should push earnings per share for the fourth quarter to $1.24, modestly above Wall Street’s consensus. Investors can also expect Citi, which reports before the bell on Wedneday, to indicate it will accelerate its pace of share buybacks in 2025. C 1Y mountain Citigroup, 1-year The two analysts are putting their weight behind Citi after what was already a strong year, when Citi surged nearly 37% in 2024, outperforming both the S & P 500 and the SPDR S & P Bank ETF (KBE) . The Street sees still more upside ahead. The typical analyst polled by LSEG has a buy rating on Citi, with a price target suggesting shares can rally close to 20% over the next 12 months. A regional play Beyond the largest banks, Wall Street also favors Minneapolis-based US Bancorp , which reports Thursday before the market opens. Morgan Stanley’s Graseck named it a “most preferred” name before its earnings report. R. Scott Siefers, analyst at Piper Sandler, upgraded USB to overweight from neutral on Monday. USB 1Y mountain US Bancorp, 1-year Siefers called US Bancorp “a value name positioned to get some swagger back” this earnings season. While Siefers said USB has fallen out of favor in recent years, he described the bank as standing at an inflection point that should allow it to provide consistently positive operating leverage. Unlike Citi, US Bankcorp underperformed both the S & P 500 and the SPDR bank ETF in 2024, when it rose 10.5%, excluding its durrent dividend of 4.2%. Still, that marked a turnaround from a 1% decline in 2023, the year of the regional bank crisis, and a 22% loss in 2022 when the Fed began tightening credit. Wall Street is even more optimistic looking ahead. The average analyst surveyed by LSEG rates USB a buy rating and, like Citigroup, has a consensus price target suggesting shares can jump nearly 20% in the next year.
