CEO David Solomon said while things are still "very, very uncertain," sentiment had improved among CEOs with hopes for a softer economic landing than had been expected six months ago.CEO Brian Moynihan also said consumers were very solid with strong balances and credit availability, as well as increasing spending activity.
But Aaron Dunn, portfolio manager and co-head of value equity at Eaton Vance is monitoring by how much banks will increase the amount of interest they pay on their clients' deposits. "If the Fed keeps moving and short rates stay elevated you want a bank that's going to have to pay the least to keep deposits," according to Dunn who sees banks offering multiple services under less pressure to boost rates.
Competing with the highest short-term Treasury rates in decade and a half, banks are having to raise savings account rates to keep deposits.While Dunn saw last year as a "best case scenario" with low credit costs and rising net interest margins based on rate increases he doesn't expect a repeat this year. "What we're going to see this year is profitability normalizing through net interest margin contraction and rising credit costs," he said.
But still, the money manager recommends keeping "high quality exposure" to the banking sector. He points to strong deposit bases at Wells Fargo
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