The nation’s biggest bank stocks represent unattractive investments at this point, says David Trone, head of U.S. banks and brokers research at JMP Securities.
The debt crises in both the United States and Europe lead to that negative view.
“I don't like the bulge bracket [big] banks at all, and it's basically because I think the market is really highly underestimating these macro risks," Trone tells CNBC.
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“I don’t have a lot of confidence in the EU [European Union debt] situation, and I don’t have a lot of confidence in our politicians [regarding the fiscal cliff] in the United States either.”
A positive resolution of the debt issues on both continents would be very helpful to the banks, Trone says.
"Certainly if we resolve our cliff and if the EU can definitively, sustainably, resolve its sovereign debt issues, you know, I think the sun will come out."
But Trone doesn’t see bank stock returns exceeding 10 percent under the Dodd-Frank regulatory regime.
Bank shares have been on a roll so far this year, with the PowerShares KBW Bank exchange-traded fund up 24 percent. But Jeff Reeves, editor of InvestorPlace.com, shares Trone’s skepticism.
Reeves argues that bank stocks are no longer cheap, that the growth in mortgage revenue will soon stall and that profit gains are coming from cost cuts rather than revenue growth.
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