RBC’s prime analysts see a comeback

In line with prime banking analyst at RBC Capital Markets, buyers who’re “detached” or unfavorable in direction of banks will change their stance within the second half of the 12 months.

Gerard Cassidy predicts a bullish return as a consequence of robust income progress and optimism round credit score.

“You may really see folks coming again [bank] inventory. They’re under-owned,” mentioned the agency’s head of US Financial institution fairness technique on CNBC’s “Quick Cash” Thursday. “At these valuation ranges, there’s restricted draw back from right here. However I believe as folks notice that banks is not going to have the credit score points that they’d in ’08-’09, that would be the actual rally level for proudly owning these names.”

Cassidy, one in every of Institutional Investor’s top-rated analysts, gave his newest forecast after the Federal Reserve disclosed the outcomes of its most up-to-date stress checks. The outcomes decided that each one 34 banks have sufficient capital to cowl the sharp downturn.

“The outcomes got here out fairly properly,” he mentioned. “One of many main dangers we hear from buyers right now is that they’re involved concerning the credit score losses being increased.”

is beneath monetary stress. With solely per week left within the first half, the S&P 500 banking sector is down 17%. Cassidy means that the group is being unfairly punished for the shock of the recession.

“What is that this [stress] Assessments present us that, in contrast to ’08 and ’09, when 18 of the 20 greatest banks lower or liquidated their dividends, that is not going to occur this time,” Cassidy mentioned. are capitalized as such. Dividends are going to be secure via the downturn.”

‘Superb Numbers’

Cassidy anticipates rising rates of interest will set the stage for “superb numbers” within the third quarter. He highlighted Financial institution of America as a serious beneficiary.

“We’re forecasting that Financial institution of America’s web curiosity revenue may improve 15% to twenty% income progress this 12 months because of the price hike,” mentioned Cassidy, who has a purchase ranking on the inventory.

He expects struggling banks together with Deutsche Financial institution and Credit score Suisse to ship higher earnings outcomes this 12 months as properly. Even within the case of monetary shock, Cassidy believes he ought to have the ability to face it and are available out with wholesome capital.

“The true danger lies exterior the banking system,” Cassidy mentioned, “as soon as folks notice that credit score is not that unhealthy and income progress is realistically robust, the sentiment needs to be moderated within the second half of this 12 months.” hopefully replaces.”

S&P Monetary gained 5% final week.

, CNBC’s Natalie Zhang contributed to this report.

Disclosure: RBC Capital Markets has obtained compensation from Financial institution of America for funding and non-investment banking providers over the previous 12 months. It has additionally managed or co-managed a public providing of securities for Financial institution of America.


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