Oppenheimer maintains generally more cautious stance on investment banks

Oppenheimer analyst Chris Kotowski says that in early September, the firm listened to one bullish presentation after another at a certain financials conference. On one level, the point is hard to argue, it says, as the firm’s own estimates show that 2026 is likely to bring low teens earnings growth to the industry. Loan growth is accelerating, card losses have peaked, as have capital levels, M&A is picking up, and trading revenues are strong. But on the other hand, Oppenheimer believes stocks are no longer cheap, and the investment banks look downright expensive. The firm maintains a generally more cautious stance on the investment banks, keeping a Perform rating on Goldman Sachs (GS) and Morgan Stanley (MS). For the commercial banks, they are still reasonably priced, and Oppenheimer has “the five little things” as a tailwind: fixed-asset repricing, accelerating loan growth, peaked card losses, buyback, and operating leverage. The firm’s top picks in order are U.S. Bancorp (USB), Citi (C), PNC (PNC) and Bank of America (BAC).