4 Reasons for Bank ETFs to Win in 2021
Zacks Investment Research | Jan 11, 2021 02:30AM ET
Bank stocks have been recovering fast lately from the pandemic-related slump. SPDR S&P Bank ETF AZN have come up with back-to-back upbeat vaccine updates since November.
This instigated sooner-than-expected return to economic normalcy and boosted risk-on sentiments, which in turn resulted in a steepening yield curve. Since banks’ net interest margin benefit from a rising rate environment, their stocks have soared lately.
Against this backdrop, below we highlight a few more reasons why banks could be great picks in 2021.
h3 Cheaper Valuation /h3Banking stocks were beaten down in the peak of the pandemic as fears of higher defaults at the household and corporate levels hit the space hard due to economic slowdown. So, banking stocks are offering value now and have found room for growth (read: with as much as $11 billion going toward shareholders . This clearly signals banks’ healthy financial position. Results from the central bank’s special coronavirus stress tests showed “a pass for all of the tested banks and a welcomed green light for capital returns,” Susan Roth Katzke, an analyst at Credit Suisse (SIX:CSGN) Group AG, wrote in a note to clients, as quoted on Bloomberg.
It means that the banks have enough capital to counter another wave of virus spread, if there is any. Notably, in June, the Fed put provisional caps on buying back own stocks or increasing dividend payments by the big banks. Soon after the announcement, J.P. Morgan (JPM) announced its $30 billion buyback decision.
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