The Federal Reserve's new restrictions on banks' ability to pay dividends and buyback shares is a "big deal," but there are still opportunities for investors, Raymond James analyst Michael Rose said on CNBC's "Worldwide Exchange."
What Happened: The Fed's move to restrict shareholder returns is more of an "earnings issue" as opposed to a capital or liquidity issue, Rose said.
The Fed deserves credit for undertaking the right measures to bolster the banking system, the analyst said.
The fact that banks need to undergo a second round of "stress tests" will add additional confidence that banks are prepared to navigate through "very choppy waters," he said.
Why It's Important: Banks are likely to emerge from COVID-19 pandemic as a "source of strength" as opposed to being "the root of the cause" during the 2008 crisis, Rose said.
Banks also remain "very well" capitalized with "pretty solid" pre-tax pre-provision earnings, the analyst said.
he recommends defensive mid-cap names like Prosperity Bancshares, Inc. PB and Home Bancshares Inc HOMB. Beta-themed plays include Regions Financial Corp RF andWintrust Financial Corp WTFC.
What's Next: Investors won't have any clarity on loan loss provisions and credit losses until the end of 2020 or even 2021, Rose said.
The peak will likely occur in the next quarter or two, as measures like the PPP need to "run its course" first, the analyst said.
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on Bankrate.com. The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.
All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the Bankrate.com rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.
Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.
Rate collection and criteria: Click here for more information on rate collection and criteria.