26 October 2023: Wealth Product Ideas
Trade Idea: US Banks
- Major US banks like JPMorgan, Wells Fargo, and Citigroup reported resilient 3Q earnings as higher interest rates boosted net interest income, despite signs of economic slowdown.
- All three banks raised their full year net interest income guidance, with JPMorgan forecasting 33% year-over-year growth, Wells Fargo 16%, and Citigroup 9%.
- Banks remain optimistic on the US consumer, though acknowledge consumers are spending down excess savings and feeling pressure from high inflation and rates.
- Weakness noted in commercial real estate sector, with some losses expected at Wells Fargo.
- Bank stocks have underperformed broader market this year on systemic risk fears after regional bank collapses, and now trade at discounts to historical price-to-book ratios.
- Major bank results suggest sector is weathering economic crosscurrents well, with higher rates providing a tailwind to profitability. But some vulnerability exists in commercial real estate.
- Valuations look attractive for banks relative to historical averages and the broad market, presenting opportunities given fundamental resilience.
Note: Pricing provided is indicative only. For updated pricing, please contact us directly.
Payout Scenarios:
Investors receive corresponding interest payments every month and;
- KO Early Redemption: Principal + KO returns (KO event occurs only when the closing price of all underlying securities is higher than the knock-out price)
- Maturity Redemption: If no KO event occurs, the payout will be:
- If the final price of all underlying is higher than or equal to the strike price, investors will receive 100% cash return on their principal, along with the final interest.
- If the final price of one or more underlying is lower than the strike price, investors will receive 100% of their principal in the form of shares of the worst-performing stock and will also receive the final interest.
(Source: Bloomberg)
(Source: Bloomberg)
