As featured on the website S&PGlobal.com on February 22, 2021
Bank stocks have surged in recent months as the outlook for credit quality and the broader economy has improved, but community bank valuations might have even more room to run, according to one investor.
The SNL U.S. Bank & Thrift Index is up nearly 90% from March 2020 lows and more than 45% since news of an effective COVID-19 vaccine surfaced. The investment community had feared that banks could sustain credit losses comparable to the hits taken during the Great Recession, but bank stocks have rallied as the worst-case scenario moved off the table and credit quality has shown few signs of deteriorating, at least through the fourth quarter of 2020.
Still, Joe Fenech, chief investment officer at GenOpp Capital Management, said in the latest Street Talk podcast that many bank stocks, particularly the securities of smaller banks, which have underperformed their larger counterparts, have greater upside. He believes that will materialize as credit quality continues to exceed expectations, M&A activity rebounds and generalist investors eventually return to the bank group.
(continued here)
