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Large US banks set for record profits in 2021

Large US banks are expected to report their highest ever full-year profits. The earnings season starts this week with some of the biggest investment houses reporting their last year’s financial performance. 

The main event for financial markets this week was the Fed’s Chair Powell testimony on the occasion of its reappointment at the Fed’s top job. Market participants looked for clues about the tightening of financial conditions and how the Fed sees inflation and employment – the two pillars of its mandate.

It is clear now that the Fed sees very possible a first rate hike in March, but it remains unclear what it will do next – tighten faster by hiking more often or tighten faster by shrinking the balance sheet? Or both?

But this is nothing new, as the Fed turned hawkish in the last quarter of last year. As such, it should come to no surprise that a recent Financial Times article points out that financial services companies are set to report record profits in 2021.

When monetary policy tightens, financial services companies benefit. On top of that, FT points out that high investment fees and lower than expected loan losses have further contributed to the record profits.

Here are three Wall Street banks to buy this month ahead of their full-year financial reports coming out: Citigroup, JPMorgan, and Bank of America.

Citigroup

Citigroup reports its  Q4 FY2021 earnings on January 14 at 11:00 AM ET. Investors expect EPS of $1.66 on the quarter, and Citi has reported better than expected quarterly earnings for the past six consecutive quarters.

The stock price is up +11.13% YTD, and, most recently, the company announced that it exits consumer and small-business banking operations in Mexico.

JPMorgan

JPMorgan is another large US bank reporting its quarterly earnings this week. The market expects the annual revenue estimate for the fiscal year ending December 2021 to reach $122.73 billion, and the stock price is up +5.77% YTD.

Bank of America

Bank of America reports its quarterly earnings on January 19, and investors expect EPS of $0.75 on the quarter. The stock price is up +10.61% YTD, and at the current market price, Bank of America has a market capitalization of $402 billion.

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