Next week the US’s big banks will begin their earnings season, and analysts are expecting solid results.
Ken Leon is a CFRA senior analyst who believes that the future of these giants in banking could be “very positive”, as there are several factors which can boost both stock and profit prices.
There is a strong upward trend for iShares big banks ETF (exchange-traded funds). It was up 60% from its 52-week-low at the time this article was written.
The CFRA analyst still sees US banks stocks rising further in 2026, thanks to the following tailwinds.
Rate environment favours bank stocks
Leon, who spoke recently to CNBC cited current rates as being a positive factor for US bank stocks.
In general, the Federal Reserve will pause its rate-lowering in January before reducing rates even further in months to come. This stance offers big banks a predictable cushion to volatility in terms of funding costs.
Lenders are better positioned to increase margins and gain investor confidence.
What is the benefit of a steeper yield curve for bank stocks?
The yield curve has shifted to their advantage, which is another major benefit for Wall Street banks.
Leon, a CNBC analyst said that banks can borrow at lower rates on the short term while borrowing more on the longer-term.
This has resulted in healthier spreads, and increased profitability for their lending business.
Stocks of banks to rise on demand for loans
The CFRA expert believes that loan demand this year will be resilient, as the “US economy is very good” with growth projections of up to 3.0%.
This translates to a steady increase in the traditional banking activities from corporate loans and mortgages.
Bank stocks are expected to benefit both from volume and price power as long as businesses and consumers continue borrowing.
Bank earnings are driven by capital markets
Ken Leon believes that capital markets are the catalyst for real growth, and not traditional lending. He noted that the capital market has driven earnings to a delta.
In 2025 the number of mergers and acquisitions, equity underwriting and initial public offering (IPO) will increase by 30%, raising $146 billion.
He concluded that this momentum would likely continue into the year ahead, driving fee incomes and increasing investment bank bottom lines.
How expensive are US large banks to buy?
Leon acknowledged that the valuations of properties aren’t inexpensive in an CNBC Interview.
He acknowledged that “when you consider things such as price and book value net tangible, these are expensive.”
He believes that investors can stay on course despite the regulatory ease that is coming – perhaps allowing for buybacks or higher dividends.
Even at current high multiples, US bank stocks are worth buying for the CFRA analyst.
The post What can we expect when US banks report their earnings next week? This post appeared first on The ICD
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