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Best and Worst of the Banking Stocks Ahead of Second-Quarter Earnings Season, According to Oppenheimer

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There's just one more sleep until the second-quarter earnings season kicks off, and the big banks are the headline event.

Goldman Sachs, JPMorgan, Citigroup and Bank of America will lead the charge with their reports over the next few days.

Ari Wald, head of technical analysis at Oppenheimer, said investors ought to be picky when it comes to banks. The firm advises a market weight on the group given "range-bound" interest rate expectations.

"For exposure to the industry, we're differentiating between them by those that have been able to rally back above their pre-Covid peaks. Those would be the ones showing relative strength in our work. For instance, we recommend JPMorgan over Wells Fargo as an industry neutral pair," Wald told CNBC's "Trading Nation" on Monday.

"You really see it in the relative ratio. JPMorgan has been the underperformer since last November. The market has been rewarding the beta on Wells Fargo. I think JP now offers rotation potential, a little bit stronger position coming back into focus," Wald said.

JPMorgan has rallied 24% in 2021, better than the rest of the market but below some of its peers. Wells Fargo, by comparison, has risen 46%.

While some banks may be on better footing, the entire group should benefit from a solid earnings season, according to Michael Bapis, managing director of Vios Advisors at Rockefeller Capital.

"Many of the key components and fundamentals are lining up in the bank's favor," Bapis said during the same interview. "On the top six banks, the deposits are up roughly 30% since the start of 2020, you're seeing the dividend yields up roughly 40% on the banks, and they're very well capitalized."

The KBE bank ETF yields 2.24%, above the 1.34% yield on the S&P 500.

"They passed all the stress tests, their most recent stress tests, and they're trading anywhere between 11 and 15 times earnings, which is historically low for the banking stocks," he said. "I believe you own them and you keep them for the long term and I would almost overweight banks right now in financials."

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