Credit Suisse has turned positive on US banks, upgrading its rating for the sector to 'overweight' from 'benchmark', saying that loan growth and asset quality are the two key drivers of returns that may surprise on the upside.

Analysts believe that US banks are a good option because the cost of debt and investment grade spreads are falling in the US, which unlike in Europe, still appear to be too high. They explain that the US sector compares favourably to the European sector because US banks have fully deleveraged and tend to have slightly better capital ratios.

Credit Suisse is also upbeat about the US private sector because balance sheets are in good shape and the country's leading indicators are turning around.

On the negative side, there is concern on banks' price-to-tangible book value relative to the market and the fact that recovery in pre-tax earnings has come solely from a reduction in loan loss provisions.

Focusing on individual banks, Credit Suisse favours JP Morgan (overweight), Huntington Bancshares (overweight), and Wells Fargo (neutral).

Analysts will be focusing in on third quarter earnings presentations in the coming days.

EARNINGS PRESENTATIONS

October 12: JP Morgan and Wells Fargo will present their third-quarter earnings. The consensus earnings per share estimate (EPS) is $1.19 (vs. $1.02 In Q3 2011) for the former and $0.87 (vs. $0.72 in Q3 2011) for the latter.

October 15: Citigroup, EPS consensus estimate: $0.98 vs. $1.23 in year-ago period.

October 16: Goldman Sachs: $2.13 vs. -$0.84.

October 17: Bank of America: $0.14 vs. $0.31.

October 19: Morgan Stanley: $0.31.

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