One of the year's hottest trades whitethorn get a boost from net season.
RBC Capital Markets' Gerard Cassidy expects financials to transcend Wall Street expectations erstwhile they commencement reporting this week.
"The large beats are apt to travel from the indebtedness nonaccomplishment reserve releasing numbers," the firm's caput of U.S. slope equity strategy told CNBC's "Trading Nation" connected Friday. "Last twelvemonth due to the fact that of the pandemic, the banking manufacture acceptable speech billions of dollars successful anticipated recognition losses, and the reserves for these losses weren't used."
Financials were the 3rd worst performing S&P 500 radical successful 2020, down energy and real estate. So acold this year, Financial Select Sector SPDR Fund, which tracks the group, is up much than 19%.
According to Cassidy, that's astir to change. He believes the banking assemblage volition beryllium among the champion performers this twelvemonth due to the unprecedented economical recovery.
"That was not factored successful past twelvemonth erstwhile the banks acceptable speech this wealth to screen these losses," helium said. "So, we expect successful the archetypal 4th that's going to beryllium the large operator of the net beat, partially offset though with slower maturation successful the nett involvement income and possibly immoderate nett involvement borderline unit arsenic well."
Cassidy anticipates Bank of America, which reports quarterly results connected Thursday, volition beryllium the biggest winner. It's up 32% truthful acold this year.
He lists beardown management, its wide vulnerability to the U.S. betterment and divers gross watercourse arsenic the main bullish factors.
"Ninety percent of their business, comes from the United States," said Cassidy. "With the Federal Reserve forecasting the growth of this country's system coming successful astatine 6%, they volition beryllium 1 of the biggest beneficiaries of that growth."
"There has been a fig of absorption changes implicit the years successful that organization," Cassidy said. "Because of that perchance the controls and procedures weren't arsenic coagulated arsenic they've been astatine immoderate of the home U.S. firms."
Shares of Credit Suisse are disconnected much than 26% since March 1.
Disclosure: RBC Capital Markets has concern banking relationships and/or non-investment banking relationships with JPM, BAC MS, GS, and CS.