Big bank stocks poised to outpace S&P 500 as ‘peak’ tariff chaos passes – BofA

Following a bout of tariff-induced market volatility, Bank of America Securities said Wednesday the worst may be over, and bank stocks are primed to outperform the broader stock market.

“Tariffs have thrown a curve ball but ‘peak chaos’ likely behind,” analyst Ebrahim Poonawala wrote in a note to clients. His top picks include JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), Goldman Sachs (NYSE:GS), BNY (NYSE:BK) and Morgan Stanley (NYSE:MS).

So far this year, megabank stocks and EPS revisions have outpaced that S&P 500, he noted.

Poonawala’s bullish call comes as his 3Rs thesis — Rates, Regulations, Rebounding activity — appear “to be on firmer footing,” he wrote.

“Regime shift on rates (structurally higher) and regulation (more balanced) should cause investors to re-evaluate the relative value proposition offered by bank stocks compared to most of the post-GFC (Great Financial Crisis) years,” he added. “Both have the potential to drive structurally higher profitability and growth.”

Meanwhile, regional banking stocks and earnings revisions have fallen short of the overall equities market, the note said. While regionals remain attractive, such as Huntington Bancshares (HBAN), Fifth Third Bancorp (FITB) and KeyCorp (KEY), they are still in need of a catalyst, including well-received M&A activity to a pick-up in lending.

“While regionals have trailed, we see the current rate backdrop and relatively healthy lending activity as offering potential for upside.”

Popular (BPOP) scored the highest SA Quant rating among U.S. regional lenders, followed by Huntington Bancshares (HBAN) and Capitol Federal Financial (CFFN).

The SPDR S&P Regional Banking ETF (KRE) slid 4.6% year-to-date, compared with the S&P 500’s 1.5% gain.