MarketsMay 24, 2021
Bank stocks forecast is looking bright with higher expected rates and strong outlook
Financial Turnaround
Kevin Roche
Discover
Bank stocks forecast: Bank stocks are slowly climbing back up but they still need your help in their recovery: Take their money— in the form of loans.
Investors hoping to take advantage of an economic recovery have turned to bank stocks, but low borrowing demand has kept their revenue down…
2020’s recession was a tough year for banks. With interest rates at a historical low and bankruptcies at their highest levels since 2009, bank revenue from loans cratered.
A year later, with the economy recovering, here’s why banks are in a good position:
(Potential) rising interest rates… Big banks get nearly half of their revenue from interest on consumer and business loans. Higher interest rates mean greater earnings on those loans.
They hoarded too much cash… When the pandemic hit, banks prepared for the worst and set aside billions of dollars in cash for the anticipated bankruptcies. Even with the huge number of bankruptcies, there were less loan defaults than expected.
After a disaster of a 2020, banks are having a turnaround in 2021 and continuing to set records:
The KBW Nasdaq Bank Index (NASDAQ:BANK), an ETF of the 24 largest banking stocks, is up about 30% this year, and experts expect them to keep growing.
With both analysts and investors expecting banks to increase dividends in the near future, bank stocks could be a smart defensive play for investors who are hoping for growth without taking on too much risk.
Learn more: Bank stocks forecast turned out to be better than anticipated in 2020
