12:20 PM EDT, 07/02/2024 (MT Newswires) -- US banks' core earnings, stock repurchase programs and commercial and industrial loan growth are likely to be among key investor focus areas when lenders release their latest quarterly results, RBC Capital Markets said in a client note Tuesday.

The brokerage estimates the median core per-share earnings to decline 1.5% in the second quarter on a sequential basis, amid lower net interest and noninterest income, partially offset by noninterest expense reductions. Annually, RBC forecasts a 4.5% drop in EPS driven by reduced net interest income and higher loan loss provisions.

Loan growth is expected to increase 0.9% sequentially and 1.2% yearly, led by consumer loans and residential mortgages, RBC Co-Head of Global Financials Research Gerard Cassidy wrote in the note. Credit losses started to normalize toward the end of 2023, but are still at "low levels" with further normalization expected this year, according to Cassidy.

RBC projects the provision for credit losses to increase 8.8% in the second quarter versus the prior three-month period and rise 12% annually, as banks build up loan loss reserves to support loan growth. Net interest margin is anticipated to decrease 2 basis points quarter over quarter and move down 16 basis points from the year before.

Banks have seen mixed stock performances so far this year versus the broader market, but the set up looks "very good" for them over the next 18 months, the brokerage said. "Looking out over this period, we expect the Federal Reserve will have cut short-term interest rates (two to three) times, the Basel - III 'endgame' proposal will have been finalized and the banks will be actively retuning excess capital back to shareholders through buybacks and dividends," according to Cassidy.

RBC expects net interest income growth to accelerate as funding costs fall. It anticipates the US economy to generate positive real gross domestic product growth, providing a tailwind for loans.

JPMorgan Chase ( JPM ) , Wells Fargo ( WFC ) , Citigroup ( C ) and Bank of New York Mellon (BK) are scheduled to release second-quarter results next week. "We continue to recommend investors overweight bank stocks in portfolios," RBC said.

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