Why Wedbush's Peter Winter Says Fed Will Gradually Increase Rates, And What It Means For Bank Stocks

The sentiment is building for a half basis point hike by the Federal Reserve in March. However,

Peter Winter, who covers regional banks at Wedbush Securities, is not so convinced.

"With rates now basically at zero and some uncertainty with the economy, a 50 basis point hike would spook the market and show that the Fed is behind the curve on inflation," he told Benzinga's PreMarket Prep on Wednesday. 

What Would Benefit The Banks The Most? Winter said a “gradual increase in rates” would benefit the banks the most. Along these lines, his models indicate that the gradual rate hikes in 2022 will top out at four, along with another two rate hikes in 2023.

That stands in stark contrast to both Goldman Sachs and JP Morgan, which are predicting eight to nine interest rate hikes in 2022 alone. At this time, both federal funds rate futures are siding more with Winter’s forecast than of the behemoth banks.

Winter Still Favors Citizens Financial: During Winter’s Dec. 8 interview on "Wednesdays With Wedbush," he outlined a bullish scenario for the issue Citizens Financial Group CFG. The issue ended the trading session on that day at $47.60.

With the issue ending Tuesday’s session at $53.13, Winter remains bullish. 

With the recent systems integration of the accounts from the HSBC Holdings merger, an additional 800,000 customers will be conducting transactions on their platform. In addition, another 200,000 will be added when the acquisition of Investors Bancorp Inc. ISBC is approved, which could occur as early as March 1.

In total, that will bring an additional 1 million accounts that have been “underserved in the New York, New Jersey area.”

Rough Q4 For Huntington Bancshares: Another smaller regional bank that Winter remains bullish on is Huntington Bancshares HBAN. Although the issue remains above its previous price when first mentioned by Winter ($15.42), it is not too far off that level. The reason: the issue was hammered following its fourth-quarter report. 

“The fourth-quarter results were a bit disappointing. Revenue trends came in a bit lighter than expected, but I do think the setup is good for this year,” he said “The systems integration with their with recent acquisition of TCF Financial is done. Now the idea is to leverage the deal, with cost savings kicking in that will help offset inflation pressures.”

He's also optimistic about accelerating “revenue synergies” from the deal.

The full discussion with Winter, which includes comments on Customer Bancorp Inc. CUBI, can be found here: