Bank stocks return to pre-Trump levels: Bank of America by Investing.com

Investing.com – Bank stocks have returned to levels seen before the 2016 election, Bank of America analysts confirmed in a note on Monday.

Bank of America explains that the sector has struggled, with the index (BKX) down 10% from its peak in November 2025, while falling just 1% over the same period.

Analysts see this decline as an opportunity for investors, given improved regulatory conditions and expected growth in client activity such as mergers and acquisitions, initial public offerings (IPOs) and loan expansion.

“Bank stocks are trading at 11-12 times 2025 P/E versus 12-14 times pre-pandemic,” Bank of America wrote, noting that the sector is one of the few subsectors in the S&P that is trading below historical valuations despite Of brighter earnings growth prospects.

The steeper yield curve is said to have provided a silver lining. Bank of America shows that the two- to 10-year UST yield spread is at its widest point since 2022, which analysts link to improving net interest margins.

“The average return on bond books for our hedging universe is 3.3% as of Q3 2024, compared to reinvestment returns of 4.5% to 5%,” the note explained. However, higher interest rates can discourage customer activity, especially in demand for loans and mortgages.

Looking ahead, Bank of America highlights that a recovery in loan growth is likely to occur in 2025-2026, requiring macroeconomic policy stability and regulatory clarity.

They note that a stable Fed funds rate supports the performance of bank stocks, although renewed inflation could derail the recovery.

Among the best choices, Wells Fargo Bank of America (NYSE:) leads recommendations due to its strong position in M&A and IPO activity. Capital markets players such as Goldman Sachs, Morgan Stanley (NYSE:), and Citigroup (NYSE:) was also highlighted for its market recovery potential, along with attractive regional banks such as US Bancorp (NYSE:) and M&T Bank (NYSE:).