Profit-taking the culprit behind banks’ underperformance

They are down by 4% YTD.

Bank stocks are underperforming the local market by 5% and are down by an average of 4% year-to-date due to profit taking after a very strong showing in 2014.

According to Nomura, this is further exacerbated by market concerns over an economic slowdown and possibly higher credit costs.

“We believe that while some of these concerns are warranted, the market has ignored the very positive impact of rising short-term interest rates. In our opinion, this is the single most important catalyst for these banks at this stage of the cycle, as it offers them significant operating leverage. Their assets get repriced faster and in a bigger magnitude compared with their liabilities,” stated Nomura.