💎Financials to the Moon💎

🎙Bank on Banks?⏱

Banks had a good run thus far for the year. Many friends have asked about our outlook for the sector. Typically, banks are scared of regulations, which restrict their ability to grow their business. Hence, their prospect is firmly tied to the happening in Capitol.

💵The Positive Side🔦

The Fed is expected to raise the interest rate three times in 2022. This is a plus for banks. It boosts their net income and also improves net-interest margins. In addition, the initial increase in interest rate tends to help banks by repricing their loans faster than the cost of deposit.

With the recovery still undergoing into 2022, we should see the banks having a mid-digit revenue growth, and earnings growth can expect to be at least around 10%, according to some analysts.

💳The Negative Side🔫

Fee income is a pain point for banks. We may not see the exponential growth and heightened trading and deal-making environment to continue into 2022. Moreover, with the Fed expected to raise interest rates, debt underwriting may soften. This means less fee income for banks.

While we believe the Biden administration to be still conducive for banks, the current administration may appear to be still slightly tougher on banks, especially in overdraft and card fees, which we have read about in the early part of the year. What is good for consumers isn’t always that well for investors of banks stocks.

🪜Our Outlook🩺

Pika World continues to favour banks as they are positioned for a growing economy. Of course, we do not expect to see the excess of 30% return this year be replicated in 2022. Still, the glowing economy may do the banks just fine unless Omicron or other exogenous shocks derail the economic recovery path.

It is 21 December, Tuesday, 7.30 am in Singapore and 7.30 pm in New York. It is yet another volatile week, and we hope our friends are having a safe trading week ahead!

Cheers,

Pika Nat.