Market Insider

Expect financials to keep surging, RBC analyst says

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Playing the banks

Financials have been on a tear lately, and the party is likely to keep going, RBC Capital Markets banking analyst Gerard Cassidy said Tuesday.

"I think what you'll find is the bank stocks are still very inexpensive relative to the market. I think people are going to continue with this rally assuming, of course, the Fed raises rates, which we think could come in July," he told CNBC's "Squawk on the Street."

The S&P 500 financial sector is up nearly 13 percent over the past three months, after a dismal start to the year. For 2016, the sector is down just 0.1 percent.

"When we look at the top 20 banks, we think it could positively impact their earnings by as much as 11 percent, if we get continuous rate increases through next year," Cassidy said.

Janet Yellen, chair of the U.S. Federal Reserve
Forget earnings, the Fed holds the key for financials: Traders

Market expectations for a June rate hike by the Federal Reserve are just 21 percent, but are nearly 60 percent for July, according to the CME Group's FedWatch tool.

Financials this year

Source: FactSet