Banks Are Looking Spiffy Again

This earnings season, one of the early emerging themes is that major banks' results are coming in better than expected. Wells Fargo (WFC) reported solid numbers last Friday. Citicorp (C) easily beat expectations on Monday, and the bank also announced a long-awaited mortgage settlement with the federal government for some $7 billion. This was a hefty number, but it was far less than what the government had originally targeted. Today we have JPMorgan Chase (JPM) blowing through both top- and bottom-line consensus, and the stock is heading higher.

The financial stocks were underperformers in the first half of the year, when they collectively posted slightly negative returns as the S&P 500 rose some 7%. But, as I look at the earnings coming from major players in the sector, I'm thinking that maybe sentiment has become too negative on this space. There should also be a high probability of rising interest rates on U.S. Treasuries in the second half of the year, given the accelerated economic growth, and since the Federal Reserve is set to finally exit its quantitative-easing programs in October. This will be good for banks' net interest margins, and for returns on insurers' investment portfolios....354 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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