“Financials”, at large, tends to be the bright spot when rates are quickly going up. But there are two names within this space, as per Gina Sanchez (CEO of Chantico Global), that are particularly well-positioned to benefit from the tightening monetary policy.
Why Sanchez likes Bank of America
Her first pick to play the higher rates is the Bank of America Corporation (NYSE: BAC) that’s currently down 30% versus the start of 2022. Making her case on CNBC’s “The Exchange”, she said:
They have managed to lock down the depositor rate at a good cost and they have a good consumer lending unit. So, they’re able to charge more and more on the loans as rates rise and their net interest margins expand during interest rate rises.
The investment bank, she added, is historically known to do well in a rising rate environment and this time is not going to be any different. Last month, Bank of America reported market-beating results for its fiscal second quarter.
Consequently, it raised its quarterly cash dividend.
Sanchez’ bull case for Morgan Stanley
Another rate-sensitive mega-cap bank she likes here is Morgan Stanley (NYSE: MS); even more so as it’s trading at a very attractive price-to-earnings multiple of 12 times. Sanchez noted:
It’s a cheap stock relative to the rest of S&P. It can participate in net interest margin play, but its real story is the tremendous recurring revenue through Wealth Management and Investment. Those two units are doing very well; very profitable, stable.
Her constructive outlook is in line with Wall Street that currently has a consensus “overweight” rating on Morgan Stanley that named two new global co-heads of investment banking last month.
In its latest reported quarter, though, the multinational came in shy of expectations.
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