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Bank earnings will deliver an upside surprise and help boost market, top strategist predicts

By Stephanie Landsman

Earnings season may kick-off with an upside surprise.

National Securities’ Art Hogan is optimistic the banks’ second quarter results will come in better than expected and help lift stocks.

“I don’t think expectations for bank earnings have ever been as low as they are coming into this quarter,” the firm’s chief market strategist told CNBC’s “Trading Nation” on Monday.” My guess is there’s going to be more good news than bad news, and this is for a group that has priced in a lot of bad news.”

He lists three reasons why the biggest banks should beat.

“What we’re forgetting is banks that are involved in those things like trading and investment banking activities will probably see somewhere between 30% and 50% growth in those markets in the second quarter alone,” Hogan said.

He also points to strong activity in the U.S. corporate debt market, and mortgage demand.

“Mortgage applications just flew out of the park during the second quarter,” he added. 

According to Hogan, those factors should offset loan loss provisions and a slumping consumer. Investors may see the evidence as soon as Tuesday’s JPMorgan Chase report.

Financials have been among the worst performing groups.

The KBW Bank Index, which is comprised of the nation’s biggest financial names, has plummeted 35% so far this year. The banks tried to stage comebacks since the March 23 low, but they failed.

Now, the Street is trying to figure out what’s next on its own.

“None of these banks gave any guidance. So, it is really a guesstimate as much as an estimate to figure out how their second quarter was,” noted Hogan.

However, that’s not discouraging him, and he sees the group as a long-term buy.

“This is a market that has done historically well when really bad news gets less bad,” Hogan said.


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