Bank shares soared last year, with the KBW Bank Index rising 30 percent.
Gerard Cassidy, head of U.S. bank strategy for RBC Capital Markets, thinks that strength will continue in 2013. Low valuations and the completion of the most damaging new bank regulations contribute to his enthusiasm.
"We continue to be bullish this year due to the continuing improvement in earnings, coming from credit improvement and also loan growth," Cassidy tells CNBC.
Editor's Note: The Final Turning Predicted for America. See Proof.
Banks are barely trading above their book value, and that’s not going to last, he says. "We think in the future banks will trade at 1.5 times book value, and that's down from 2.3 times book value from 1997 to 2006."
As for the Dodd-Frank law, while more rules are coming, "when you take a look at the regulatory issues for the vast majority of banks, the most onerous ones have already been put into place," Cassidy says.
His picks include, Discover Financial, Fifth Third, PNC Financial and Wells Fargo.
To be sure, not everyone is jumping up and down over banks. The factors boosting earnings last year, like improved credit quality and mortgage refinancings, have largely run their course, say analysts such as Morningstar’s Jim Sinegal.
"As far as earnings go, there are no real areas for huge improvements," he tells CNNMoney.
“I wouldn't be surprised if the next quarter or two are pretty quiet."
Editor's Note: The Final Turning Predicted for America. See Proof.
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