U.S. banks stocks are being supported by regulatory and tax reform hopes, while 4Q fundamentals could be better given soft loan growth, a flattening yield curve, and markets activity.
Is Loan Growth going to meet market expectations? Credit Card and Auto less of an issue right now but large corporate loan expansion is subdued.
- Intermediate-term risk/reward is perhaps more challenging at current valuations. Bank Earnings Yields are low by global standards, a reflection of paying up for sub 10% ROEs.
- Focus will be increasingly on Technology-driven Efficiency improvements and this could sustain momentum with an improving regulatory backdrop despite mixed signals from the broader economy.