The rally in financials may have paused recently, but expert Anton Schutz still thinks it’s a great time to be a bank stock investor.
That’s because the Federal Reserve hiked interest rates in December, the yield curve is steepening and there is optimism for loan growth, the chief investment officer for Mendon Capital Advisors said in an interview with CNBC’s “Closing Bell” on Thursday.
On top of that, President-elect Donald Trump is proposing a cut in the corporate tax rate, he added.
“They’re one of the biggest beneficiaries of tax cuts. And that’s where estimates can meaningfully go higher,” Schutz said.
While loan growth, rate hikes and the yield curve are “kind of” priced into the sector, tax cuts are “quasi” priced in, he noted.
“So I think the group can have a whole lot more if it happens. Now some of the regulatory changes that can happen can really be a big driver as well,” he said.
The incoming Trump administration has indicated it would like to strip back parts of the Dodd-Frank bank reforms, including possibly the Volcker Rule. The rule was meant to restrict banks from making speculative investments.
Among the big banks, Schutz said he likes Bank of America because it is the most interest-rate sensitive.
When it comes to regional banks, he prefers names like BNC Bancorp, Synovus Financial and Western Alliance.
“They all have drivers. They are interest sensitive. They’re going to do M&A,” he said.
That uptick in mergers and acquisitions could be spurred on by those regulatory changes, he noted.