Large Cap Banks - Post 2Q26: Sector Allocation, Inflation, AI Near Term Drivers; Cap Mkts, C&I Loan Growth Key To Revenues

Research evidence excerpt

Large Cap Banks - Post 2Q26: Sector Allocation, Inflation, AI Near Term Drivers; Cap Mkts, C&I Loan Growth Key To Revenues

omy.

War, dated June 4, 2026

• We expect bank stocks in general to benefit near term from technical

factors such as sector allocation with rotation into the sector. Medium term, Consumer Credit: Credit Metrics Holding

we expect some choppiness due to concerns about the war and inflation. We Up - Impact of Inflation, AI Key

prefer Money Centers over Regionals due to larger exposure to markets-related Uncertainties; Post Tax Refund Spending?

revenues and asset sensitivity. Among Money Centers, we relatively prefer Younger Age Unemployment, dated May

Bank of America due to benefit from higher markets-related revenues, higher 22, 2026

reinvestment yields, and overall asset sensitivity. Among regionals, we

relatively prefer Citizens Financial due to asset sensitivity and higher capital

markets exposure, and Fifth Third due to asset sensitivity and potential for

higher synergies from Comerica acquisition - expense synergies near term and

some revenue synergies over time.

• Money Center banks are trading at 1.9x P/TBV ex-OCI versus 1.3x long

term average and Regionals at 1.9x versus 1.5x average.

• Net interest income and non-interest income outlook for FY26 saw mixed

trends among our banks recently - outlook was raised at several of our banks

and flat at several others. The outliers that lowered guidance: Truist and

Huntington lowered net interest income guidance while Regions lowered non-

interest income guidance. See page 8.

• Investment banking fees expected to remain high given large pipelines and

ECM has started off strongly in July with volumes up 50% yoy. Investment

banking and Trading revenues should see some summer slowdown in August