Deutsche Bank looks ahead to US bank stocks Q1 financial report season: overall performance expected to be solid, net interest income likely to push upward towards guidance.

The US bank stock earnings season will kick off on April 13th (Monday) in US Eastern Time, with Goldman Sachs Group, Inc. (GS.US) set to announce its first quarter 2026 earnings before the US stock market opens. Recently, Deutsche Bank Aktiengesellschaft released a report stating that overall bank performance is expected to be stable/strong, with most banks' net interest income (NII) expected to be at or above the upper end of guidance (or even higher), strong trends in capital markets business (investment banking + trading business), good operating leverage, and stable asset quality. Deutsche Bank stated that the banks they are most optimistic about before the earnings release include Huntington Bank (HBAN.US), PNC Financial Services Group, Inc. (PNC.US), and U.S. Bancorp (USB.US). Deutsche Bank pointed out that, since we are only in the first quarter of the year and macroeconomic uncertainties are on the rise, most banks are not expected to make significant adjustments to their 2026 fiscal year guidance. However, within their coverage universe, JPMorgan Chase (JPM.US) may once again raise its full-year net interest income guidance, as loan growth is strong and interest rate expectations are rising; Bank of America Corp (BAC.US) may also raise its guidance, or at least tighten the guidance range to the higher end. Other banks may maintain their net interest income guidance unchanged, as the sustainability of loan growth remains uncertain, and the interest rate environment and prospects are volatile. On the contrary, Truist Financial (TFC.US) may suggest a downside to the full-year guidance, as its net interest margin (NIM) expansion is more reliant on rate cuts, and management had previously assumed a rate cut pace earlier than the market generally expected. 1. Best/Weakest Performing Banks in Q1 2026 Deutsche Bank stated that their Q1 earnings per share (EPS) forecasts for the 15 large banks they cover are on average about 1% higher than market consensus. The forecasts are highest above market consensus for Goldman Sachs Group, Inc., Huntington Bank, and KeyCorp (KEY.US), and lowest below consensus for M&T Bank Corporation (MTB.US). Before the earnings report, Deutsche Bank is most bullish on Huntington Bank, PNC Financial Services Group, Inc., and U.S. Bancorp, for the following reasons: 1) Huntington Bank: The stock had lagged previously due to cost concerns, uncertainties about merger transaction valuations, and market concerns about potential large bank mergers. However, considering its strong independent growth prospects, reasonable merger assumptions, better-than-market credit review quality, and confidence that management will not engage in large mergers during periods of undervaluation, Deutsche Bank still sees Huntington Bank as a preferred target. The current stock price (based on 2026-2027 consensus levels) is discounted by 12%-13% compared to peers, with pessimistic expectations largely priced in, creating an investment opportunity. 2) PNC Financial Services Group, Inc.: PNC Financial Services Group, Inc. has high leverage on commercial and industrial (C&I) loan growth (accounting for 55%-60% of loans) and capital markets business (accounting for 6%-7% of revenue). At the same time, the bank has always been one of the best-performing banks in credit risk management, maintaining asset quality at a leading level among peers since the global financial crisis. 3) U.S. Bancorp: U.S. Bancorp has achieved or exceeded guidance for three consecutive quarters, a trend expected to continue in Q1 2026. Additionally, among the banks covered by Deutsche Bank, U.S. Bancorp is considered a bank stock with strong credit defense attributes, with an advantage in the current environment of rising credit concerns. Despite this, U.S. Bancorp's current stock price is discounted by about 6% compared to consensus expectations for the 2026 fiscal year, and is essentially flat for 2027. 2. Key Themes Deutsche Bank stated that revenue trends are expected to reflect a basically stable net interest income quarter-over-quarter, with strong growth in commercial and industrial loans offsetting the impact of a two-day decrease in the quarter and seasonality issues in credit card business. Capital markets business is expected to perform strongly, with investment banking revenue expected to grow by 20% and trading revenue expected to grow by 15%, while other fee income is largely in line with expectations. Other trends expected include overall stable asset quality (though some banks may have volatility-related losses), good cost control, and a slight increase in stock buybacks (affected by a decline in stock price during the quarter). Deutsche Bank expects net interest income to be at or above the upper end of guidance, driven mainly by loan growth exceeding expectations. Net interest income is expected to be essentially flat quarter-over-quarter, with loan growth offsetting the impact of the decrease in days in the quarter. Net interest margin is expected to increase by 2 basis points quarter-over-quarter. Year-on-year, Deutsche Bank predicts that overall net interest income for the banks they cover will increase by 8%, marking the strongest growth since the second quarter of 2023. 3. Adjustments to Full-Year EPS Forecast Deutsche Bank noted that in mid-March, several banks had released opinions on the macro environment, disclosed trends during the quarter, and updated guidance. Based on subsequent communication with each bank, Deutsche Bank has updated its profit forecasts. Overall, Deutsche Bank's forecasts for the 2026 fiscal year remain largely unchanged. Additionally, the bank has released, for the first time, forecasts for the 20272028 fiscal years for most of the banks they cover. Overall, the bank's forecasts for the 2027 fiscal year are in line with market consensus, while forecasts for the 2028 fiscal year are about 1% higher.