FBR gave clients its top bank-stock ideas for next year under Donald Trump's economic policies.
The firm is still bullish on several companies even after the sector's large advance postelection.
The Financial Select Sector SPDR Fund rallied 18 percent since Nov. 8 as of Wednesday's close.
The rally is "a sign of tactical asset allocation among funds, which reflects some combination of regulatory relief, corporate tax relief, and a potential acceleration in GDP growth/higher interest rates," analyst Paul Miller wrote in a note to clients Tuesday. "It is clear that bank stocks — especially the ones with asset sensitive balance sheets — still have room to run if we do find ourselves in the bull-case scenario, which we view to be a more likely outcome than not given the mandate to lower corporate taxes, deregulation, and Republican control of the two chambers."
The analyst cited how five out of the last seven presidents passed a tax reform bill in their first year of office.
"Republicans view their sweep of the election as a mandate to pass the first comprehensive overhaul of taxes in a generation. Legislative tactics, such as budget reconciliation, provide the tools to pass legislation without Democratic support," he wrote.
Here are four top financial picks from FBR for 2017.