Since Trump was elected to a second term as president, bank stocks have gone up a lot. But people who trade need to think about whether some stocks are priced too high. A screen of two U.S. bank averages shows 15 stocks that are still priced pretty low.
There are many things that work in banks’ favor. Between 4.50% and 4.75% is now the level that the Federal Reserve wants the federal funds rate to be. This is 75 basis points less than what it was two months ago. Because funding costs are going down, many banks will be able to increase their net interest margins. This is the difference between how much interest they earn on loans and investments and how much interest they pay for savings and loans.
Christopher Marinac, head of research at Janney Montgomery Scott, wrote in an email exchange on Monday that he and his coworkers were “confident Banks’ valuations should move higher from current prices” because of price-to-earnings and price-to-tangible-book ratios. He also said that he thought banks’ average estimates of earnings per share would go up, which would “support higher stock prices.”
Another important change for banks will be the new rules and regulations that come with the Trump government.
