The senior analyst raised the recommendation for U.S. banks after Powell’s press conference via Investing.com

Investing.com – Odeon Capital raised its buy recommendation on five banks after the Federal Reserve signaled the end of its fight against inflation. They are: Bank of America (NYSE:), Wells Fargo (NYSE:), US Bancorp (USB), PNC Financial Services (NYSE:) and Truist Financial Corp. (NYSE: ).

According to Odeon analysts, Federal Reserve Chairman Jerome Powell was “clear” that inflation was under control. They highlight Powell’s indication that it is time to discuss reducing monetary stimulus. Also, he acknowledged that real interest rates are consistent with the 2.0% inflation target. Therefore, they believe that the central bank’s next move will be to cut interest rates.

Earlier, Odeon analysts were wary of banks as they expected interest rates to remain “high”, affecting the value of the sector’s assets. “The expectation of lower interest rates, albeit distant (probably in the second half of 2024), changes this scenario,” analysts say. They say that bank assets will be more valuable, the need to issue shares will decrease and profit growth will be higher. Overall, “banks are overvalued,” they said. They also see the possibility of a steepening of the yield curve, with short-term rates falling below long-term rates and improving banks’ interest margins.