Bullish on banks, because…

My reasons for turning bullish on bank stocks include:

a) I expect longer dated interest rates to rise (reminding me of the 3-6-3 rule, pay 3% on the deposits, lend money out at 6% and be on the golf course by 3pm)

b) this means their net interest margins should increase

c) banks have taken their medicine and paid their fines for past indiscretions (it’s not new news)

d) banks have already made extraordinary provisions for COVID-19

e) in turn, I expect them to revise and lower these provisions to account for the quicker than expected business recovery.

November 5, 2020
By Rob Zdravevski

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