Bank stocks have underperformed since Russia launched its invasion of Ukraine in late February. Despite the recent weakness, Bank of America analyst Ebrahim Poonawala said this week the interest rate environment is paying out even better than expected for big banks.
Rates and Earnings
The updated Federal Reserve dot plot projections suggest six more rate hikes in 2022 and a year-end 2023 fed funds rate of 2.75 percent. Poonawala said this rate hike trajectory implies upside to consensus 2022 and 2023 bank stock earnings estimates. In addition, he said rising 2-year U.S. Treasury yields should help banks as they deploy excess cash flows from bond books into higher yielding investments.Poonawala said JPMorgan Chase & Co, M&T Bank Corporation and Signature Bank have particularly large amounts of excess cash to deploy.
