Bank stocks could experience a short-term pop later this week when big names such as JPMorgan Chase (JPM.N), Citigroup (C.N) and Wells Fargo (WFC.N) post quarterly results, analysts said.
Banks in general have become attractively valued after a downturn in December and a selloff to start the year.
In addition, bigger banks are poised to benefit from higher interest rates while also having relatively little exposure to bad loans in the energy sector compared to smaller regional banks.
The options market is currently pricing in a move of 3.7 percent for JPMorgan after it reports earnings on Thursday morning, versus its average post-results move of 2.1 percent.
For Citi, the implied move is 4 percent against the 3.5 percent average while the anticipated move for Wells Fargo is 3 percent versus the 1 percent average. Those two banks report earnings on Friday.
The S&P financial index .SPSY dropped 2.4 percent in December and has followed that with a decline of more than 8 percent so far this month. That decline has helped bank stocks look cheap when compared to the broader S&P 500 .SPX.
While financials still are expected to be one of only four sectors to show earnings growth this quarter, according to Thomson Reuters data, those expectations have been dimming rapidly.
On Jan. 1, expected growth for the sector stood at 10.9 percent, now it is at 7.2 percent, representing the largest decline in expectations among S&P sectors this year.
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