Bank stocks have rebounded to pre-2016 levels with potential for growth, trading below historical valuations.

From Investing.com: 2024-12-23 08:32:47

Bank stocks have rebounded to pre-2016 election levels, with the BKX down 10% from its 2025 peak. BofA suggests this pullback is an opportunity for investors, citing regulatory improvements and expected customer activity growth like M&A and IPOs. The sector is trading below historical valuations, offering potential for earnings growth.

A steeper yield curve has benefited bank stocks, with the 2/10-year UST yield spread widest since 2022. Improved net interest margins are linked to this, with bond book yields at 3.3% versus reinvestment yields of 4.5-5%. Elevated interest rates could impact customer activity, especially in loans and mortgages.

BofA predicts a rebound in loan growth by 2025-2026, contingent on macroeconomic stability and regulatory clarity. A stable Fed Funds rate supports bank stock performance, but resurgent inflation poses a risk. Top picks include Wells Fargo for M&A strength, and players like Goldman Sachs and Morgan Stanley for market rebound potential. Regional banks like US Bancorp and M&T Bank are also highlighted.



Read more at Investing.com: Bank stocks back to pre-Trump levels: BofA By Investing.com