US big banks are set to kick off earnings season next week, and experts are bracing for solid results.
According to Ken Leon, a senior CFRA analyst, the outlook for these banking giants is “very positive”, with several tailwinds that could lift both profits and stock prices.
Note that iShares’ big banks exchange-traded fund (ETF) has already been in a sharp uptrend – up nearly 60% versus its 52-week low at the time of writing.
Still, the CFRA analyst sees US bank stocks rallying further in 2026 on the back of the following tailwinds.
Rate environment favours bank stocks
Speaking recently with CNBC, Leon cited the current rate environment as a major positive for the US bank stocks.
The Federal Reserve is broadly expected to pause in January and lower rates further in the months ahead. What this stance means for big banks is predictable funding costs, offering a cushion against volatility.
With a more lenient monetary policy, lenders are positioned to expand margins, and investors gain confidence in their forward earnings.
How steepening yield curve benefit bank stocks
Another major tailwind for the Wall Street banks this year is the yield curve that’s shifted in their favour.
“We’re seeing a steepening yield curve that’s improving net interest margins,” Leon told CNBC, adding this dynamic enables banks to borrow cheaply on the short end while lending at a higher rate on the long end.
The result: healthier spreads and strong profitability in their core lending businesses.
Bank stocks to rally on loan demand
According to the CFRA expert, loan demand will remain resilient this year as “the US economy is still very good,” with growth projected at up to 3.0%.
That translates into steady expansion in traditional banking activities, from mortgages to corporate lending.
As businesses and consumers continue to borrow, bank stocks will benefit from both volume and pricing power.
Capital markets to drive bank earnings
Beyond traditional lending, Ken Leon sees capital markets as the real earnings catalyst. “The delta for earnings has been the capital markets,” he noted.
Mergers and acquisitions (M&A), equity underwriting, and initial public offerings (IPOs) surged in late 2025, with $146 billion raised – up 30%.
And that momentum will likely carry into this year, fueling fee income and accelerating investment banks’ bottom lines, he concluded.
Are US big banks expensive to own?
In the CNBC interview, Leon admitted that valuations aren’t cheap.
“When you look at things like price and net tangible book value, they’re expensive,” he acknowledged.
Yet with regulatory easing on the horizon – possibly enabling buybacks and higher dividends – he believes investors should stay the course.
For the CFRA analyst, the combination of strong fundamentals and capital return makes US bank stocks worth owning, even at the current elevated multiples.
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