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U.S. Bank Earnings Expectations ‘Too High,’ KBW Says

First-quarter earnings at U.S. banks may miss “exceedingly high expectations” of investors and stall gains in financial stocks, analysts at KBW Inc. said.

While KBW expects a “strong quarter” for the so-called universal banks, which include Goldman Sachs Group Inc. (GS), Citigroup Inc. (C), JPMorgan Chase & Co. (JPM) and Morgan Stanley (MS), “year- over-year comparisons are very challenging,” David Konrad, Andrew Del Medico and Brian Finneran wrote yesterday to clients.

KBW’s universal banks advanced more than 40 percent this year as an improvement in the U.S. economy and the mortgage servicing settlement with state attorneys general boosted investor confidence and expectations, the analysts wrote. JPMorgan could set a “high bar” in the three months ended March 31 as improvements in trading, mortgage banking and continued loan growth aid profit, they wrote.

“Are expectations too high? We believe the answer is yes,” the analysts wrote. “The stocks will face near-term headwinds following the actual results in April.”

To contact the reporter on this story: Laura Marcinek in New York at lmarcinek3@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net

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