Analyst: big banks have an edge over their smaller rivals

on Jun 29, 2022
  • Analyst explains why he prefers big banks over their smaller rivals.
  • Four out of the six of these banks increased their dividends this week.
  • The Invesco KBW Bank ETF is down 30% from its year-to-date high.

The Invesco KBW Bank ETF is down 30% from its year-to-date high; still, a Senior Research Analyst at Piper Sandler says bank stocks are a “decent” investment amidst the market uncertainty.

Jeffery Harte prefers the mega-cap bank stocks

U.S. Federal Reserve has already confirmed that the big banks are well-positioned to weather a looming recession. Defending his constructive view on CNBC’s “Closing Bell”, Jeffery Harte said:

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Personally, I’m still a fan of the larger banks; not only do they have net interest income tailwinds which help banks in general, but they’ve also got the scale to gain market share while still having wider profit margins.

A day earlier, four out of the six mega-cap U.S. banks announced an increase in their respective dividends. JPMorgan and Citi were the two that left payments unchanged citing stringent “capital requirements”.

Big banks can spend more on getting stronger

JPMorgan did, however, announce a $30 billion stock repurchase programme last month. Harte is also positive on the Wall Street banks for their ability to spend more on marketing and technology. He noted:

They’re spending more money on marketing; it’s an opportunity to get more clients. The fintechs were taking share from banks for a while, but if you have leading edge technology, that’s going to help you in getting stronger while others get weaker.

Earlier in June, the U.S. central bank resorted to its biggest rate hike since 1994 – a 75 basis points increase that set the bank stocks up to thrive in the coming months.  

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