3 bank stocks to buy before earnings: Pro

Shares of three financial names are worth buying ahead of this week's quarterly earnings reports, bank analyst Betsy Graseck said Monday on CNBC.

Graseck, a large-cap bank analyst at Morgan Stanley who was selected as a No. 1 commercial bank stock picker by StarMine, named her top picks Monday on "Halftime Report": Bank of America, BlackRock and American Express.

On Bank of America, she has a price target of $23 per share over the next 12 to 18 months.

BlackRock Inc. headquarters in New York City.
Adam Jeffery | CNBC
BlackRock Inc. headquarters in New York City.

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"Two main reasons: One, they're executing extremely well on the expense side of the equation and their core operating expenses," she said. "And, No. 2, they are benefit(ing) from rising rates on front end of the curve in particular, even more than the long end."

Graseck said that the front end of the yield curve was more important for banks' profitability.

"(The) long end coming down is a little bit of a drag, but really it's more about what the front end is going to do that's going to drive these stocks into next year," she added.

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On BlackRock, Grasek has a $404 price target.

"Mainly this is all about net inflows," she said. "What kind of net inflows can they drive? And with their very broad suite of products, we think that their net inflows will see some improvement over the course of the next 12 months, up to 3.5, 3.7 percent."

Grasek's third pick—American Express, with a $110 price target—was partly based on an improving retail outlook for the year, increasing 4 to 5 percent year over year.

"Bottom line: Consumers feel better, and we think that that's going to drive some better spend(ing) in the third quarter," she said.

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Bank of America and BlackRock are expected to report quarterly earnings before Wednesday's market open. American Express is scheduled to release its earnings after Wednesday's market close.

Rosecliff Capital's Mike Murphy agreed with Grasek's call on BAC, which he owns.

"Bank of America does not need rates to go higher in order to get up near its book value," he said.

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Stephen Weiss of Short Hills Capital stuck with his long position in Citigroup.

"If the yield curve does steepen, that's going to add more earnings to them," he said. "But right now, you don't need it. They're more efficient."

Disclosure: Graseck does not hold any positions in the stocks she mentioned.