The financial sector is up more than 150 since the March 2009 lows, outperforming the major averages by a wide margin. But with the US government selling its stake in companies like Citigroup, is now the time to buy? Thomas Michaud, vice chairman and president of Keefe, Bruyette & Woods, shared his sector insights.
“What’s happening right now is that the industry is raising a ton of capital and that’s been the number one solution,” Michaud told CNBC.
Michaud said he expects the bigger banks such as JPMorgan and US Bancorp to return to normalized earnings by second half of 2011.
“Because they’ve paid off TARP, they’re through their problem assets sooner and they’re able to get back in the game,” he explained.
“Some of the regional banks and some of the other banks might not be until 2014, so if you had to pick a median, you have to get to the end of 2012 to get everyone in.”
“But what we’re saying to investors is invest in the stocks that come out earlier because they’re going to be able to have organic growth sooner than the late-cycle banks,” he added.
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Michaud, his family members and banking clients own shares of JPM and USB.
Additionally, KBW currently makes a market and/or acts as a liquidity provider in USB and JPM.