One of the hottest trades of the year could be boosted by the earnings season.
Gerard Cassidy of RBC Capital Markets expects financial data to exceed expectations on Wall Street when they start publishing their reports this week.
“The big beats are likely to come from the loan loss reserve release numbers,” the company’s head of US bank equity strategy told CNBC.Trading nation“Friday.” Last year due to the pandemic, the banking industry set aside billions of dollars in anticipated credit losses, and reserves for those losses have not been used. “
According to Cassidy, that is about to change. He believes the banking sector will be among the best performers this year due to the unprecedented economic recovery.
“This was not taken into account last year when the banks set aside this money to cover these losses,” he said. “So we expect that in the first quarter this will be the main driver of the profit beating, partially offset by slower growth in net interest income and possibly some pressure on net interest margin as well.”
Cassidy anticipates Bank of America, which will release its quarterly results on Thursday, will be the biggest winner. It has increased 32% so far this year.
He cites strong management, its broad exposure to the US recovery and diversified income streams as the main bullish factors.
“Ninety percent of their business comes from the United States,” Cassidy said. “With the Federal Reserve planning the the country’s economy is growing at 6%, they will be one of the biggest beneficiaries of this growth. “
“There have been a number of leadership changes over the years in this organization,” Cassidy said. “Because of this, controls and procedures may not have been as strong as they have been in some US domestic companies.”
Credit Suisse shares have lost more than 26% since March 1.
Disclosure: RBC Capital Markets has investment banking and / or non-investment banking relationships with JPM, BAC MS, GS and CS.