'Bank bonanza' could be coming for the first time since before the Great Recession

Key Points
  • Many bank stocks have still not regained the ground lost when they were pounded during the Great Recession, but they could prove to be winners post-Covid.
  • Banks have cleaned up their balance sheets and are stronger than they were in the past, so a pickup in interest rates should help their bottom lines.
  • Wells Fargo bank analyst Mike Mayo said a "bank bonanza" is coming, but the industry has been hurt by low rates and it's still in the process of bottoming.
Pedestrians walk past a Citibank branch in Washington, D.C.
Andrew Harrer | Bloomberg | Getty Images

Bank stocks could be winners in the post-Covid world.

The prospect of an improving economy, massive fiscal stimulus and rising interest rates has been giving a boost to financial stocks and is expected to continue to lift them and other cyclical sectors.

But banks have especially been laggards, and they have struggled to regain their highs from before the Great Recession. Now with strategists expecting higher interest rates and a steeper yield curve, banks could outperform.

"The macro environment is telling you, you should be looking at financial stocks," said Julian Emanuel, head of equity and derivatives strategy at BTIG.

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