‘Credit euphoria’ will drive banks to booming profits: Mike Mayo
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Mike Mayo is a top analyst and believes Wall Street has underestimated financials before earnings season.
Mayo, who follows large-cap banks for Wells Fargo Securities, suggests investors haven’t fully acknowledged the benefits associated with the booming stock market — from merger to wealth management fees.
CNBC’s managing director of the company said that “it’s bullish banking”.Trading NationThis Thursday. It’s a great time to bank long.
The outlook is positive and he has a passion for finances. His outlook is accompanied by a passion for financials. SPDR S&P Bank ETFIt just had its fourth positive session since five on Thursday, rising 0.77%. The stock has risen by more than 10% in the last three months, while the S&P 500This is an increase of about 1%.
Two of Mayo’s Top Picks JPMorgan ChaseAnd Bank of AmericaThey are also on an upward trend. JPMorgan shares trade at new highs, and Bank of America has reached levels never seen since February 2008, months prior to the credit crisis.
However, Mayo still questions the attitude of bank investors.
The global financial crisis is a night-and-day battle.
Credit euphoria is what you have. “It’s night and day in comparison to the global financial crises,” he stated. The crisis brought about the collapse of banks. Banks have become a source for strength after the Pandemic. They should also have some of the lowest loan loss rates in recent history.
Mayo is one Institutional Investor’s top-ranked analysts. Mayo was a top-rated analyst for Institutional Investor from 1999 through 2016. He had a sell rating in relation to the banking industry between 1999 and 2016. In 2010, Mayo testified in front of the Financial Crisis Inquiry Commission. This commission was created following the credit crisis of 2008.
His positive stance regarding banks now spans several years
He stated that banks during the pandemic were able to play a solid defense. Banks are now ready to take on offense.
However, his positive assessment of the sector comes with one caveat. Loan growth might take longer than expected. Mayo sees it as temporary. tied to supply chain disruptionsThe impact of inventory growth on lending, as well as the potential for it to be a catalyst for further borrowing. He lists also the delta variant. CovidAs a headwind.
This may be a slow process. Mayo stated that it was likely to return. “That is what I will be asking management teams during the earnings conference.”
He’s also watching. inflation’s impactInformation about the banking industry.
“Once interest rates increase, and the yield curve gets steeper, and the short end goes higher — that is going to be a boon for banks and their net interest margins,” said Mayo. That’ll be amazing. You can have inflation if there is an excessive increase in the interest rate. that could eventually be hell“
Mayo says it is too soon to consider such a scenario. He argues that technology advances have made banks more efficient which has helped propel them into the multi-year bull markets.
“This point is most important about banks. They retool with technology every ten years. Mayo stated that they spent the past decade in technology retooling. We are big believers in technology and favor banks that can look great in both the short-term as well as the long-term.
Also, he lists Goldman SachsAnd PNC FinancialAs earnings season draws closer, these are his top picks. The earnings season begins Wednesday with JPMorgan’s quarterly results.
Disclosures: Wells Fargo Securities’ analyst and/or family and the firm own shares of the bank stocks mentioned above. Wells Fargo has invested and not-investment relationships, has a market in the common stock of these companies, and participated in public securities offerings.
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