Oppenheimer Charts The Last 6 Years Of Bank Stock Catalysts

Bank stocks have been on quite a run in 2016 on hopes for rising interest rates, de-regulation and lower corporate taxes in the Donald Trump era. While bank stocks are getting closer to fully-valued in the near-term, Oppenheimer analyst Chris Kotowski believes the 2017–2018 period could provide the perfect environment for long-term bank investors.

According to Kotowski, the next two years could be the sweet spot for big banks after years of struggles.

“We say 2017-2018 might be ‘Goldilocks’ years because credit costs are likely to remain low, expenses have been tamped down and will likely stay that way, but revenues seem poised to get a lift,” Kotowski explained.

At the same time, Oppenheimer downplays the role potential regulatory and tax changes will have on the banks.

For Kotowski, the biggest bullish thesis when it comes to bank stocks is they major cost-cutting they’ve done in the years following the Financial Crisis.

The chart below is Oppenheimer’s take on the key phases of the bank stock recovery cycle since the Financial Crisis.

Oppenheimer names Bank of America Corp BAC, Citigroup Inc C, Goldman Sachs Group Inc GS and CIT Group Inc. CIT as its top four big bank stock picks. Since Election Day, the Financial Select Sector SPDR Fund XLF is up 18.3 percent.