RBC top analyst sees comeback

Investors who are “apathetic” or negative toward banks will change their stance in the year’s second half, according to RBC Capital Markets’ top banking analyst.

Gerard Cassidy predicts bullishness will make a comeback due to strong revenue growth and optimism surrounding credit.

“You can really see people coming back to [bank] the stocks. They’re under-owned,” the firm’s head of U.S. bank equity strategy on CNBC’s “Fast Money” on Thursday. “At these valuation levels, there’s limited downside from here. But I think as people realize the banks are just not going to have the credit issues that they had in ’08-’09, that’s going to be the real rallying point for owning these names.”

Cassidy, one of Institutional Investor’s top-rated analysts, delivered his latest forecast after the Federal Reserve revealed the results of its most recent stress tests. The results determined all 34 banks have enough capital to cover a sharp downturn.

“The results came in quite nicely,” he said. “One of the major risks that we hear from investors today is that they’re worried about credit losses going higher.”

Financials have been under pressure. With just a week left in the first half, the S&P 500 banking sector is off 17%. Cassidy suggests the group is being unjustly penalized for recession jitters.

“What this [stress] test shows us, that unlike in ’08 and ’09, when 18 out of the 20 largest banks cut or eliminated their dividends, that’s not going to happen this time,” said Cassidy. “These banks are well-capitalized. The dividends are going to be safe through the downturn.”

‘Amazing numbers’

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