Large-cap banks are a buy, said Barclays analyst Jason Goldberg.
“This is the third consecutive year we think to see manager’s margin expansion,” Goldberg told CNBC, referring to a metric hardened to compare a firm’s investment with its debt. “You haven’t seen that since the 1970s.”
Goldberg indicated several attributes make financials “very attractive”: continued crop, credit quality, positive operating leverage and expense control comforted by technology and retail branch reduction, positive capital return with broadening dividend to buy back and the prospect of deregulation.
“The group has a lot of excess capital,” Goldberg stipulate Monday on “Power Lunch.” “They’re going to make a lot numberless earnings this year, aided by lower tax rates. And we think they’re affluent to return a decent amount of that back to shareholders.”
Higher enrol rates and a “sound economic backdrop” are the top reasons why this group is a buy, said Goldberg, who is be in charge of director and senior equity analyst at Barclays. He pointed out that waxed volatility also helps trading revenues.
“For the biggest banks you’ve known very stable trading revenues over the last several years in very low volatility,” Goldberg said. “This year you’ve really dated volatility increase across asset classes. Obviously, equities get a lot of build up b act up. But you’ve seen increases in interest rate volatility and foreign exchange volatility.”
Monetary stocks have risen 5.37 percent since the Feb. 9 low, as the Dow Jones industrial so so dropped more than 1,000 points. Other sectors to leap back since last Friday’s low are technology, consumer discretionary, stuffs and industrials.
In financials, Goldberg recommends Citigroup, J.P. Morgan and Wells Fargo. Barclays is overweight on Wells Fargo with a $71 cost target.
“Certainly Wells Fargo did a lot of things wrong in the past,” Goldberg divulged. “As we look ahead, we think they have the ability to manage within that asset cap the Fed put on them to some degree well. … So, while it may not be the best company at the moment, it does not marvellous it is not an attractive stock.”