Bank stocks could surge in economic recovery - Bank of America strategist

CNBC reports that Bank of America strategist Savita Subramanian said that bank stocks are undervalued and investors should buy them as the United States economy looks to dig out of the hole caused by the pandemic.

"This is a sector that's probably going to recover faster than others in an upturn. It's also priced relatively conservatively," Subramanian said.

Bank stocks have been one of the hardest-hit sectors since the pandemic sparked a global selloff in equity markets. Financial companies have been hit by both the economic downturn and the lowered interest rates from central banks around the world. Major U.S. banks took big hits from increased loan loss reserves in the first quarter as they prepared for possible loan defaults during the recession.

Subramanian pointed to the shape of the economic recovery in China as a reason to be bullish on bank stocks, saying that financials are bouncing back stronger than consumer businesses in that country.

"We've seen activity start to normalize in China. They're maybe a month or two ahead of us ... and what's interesting is that in China the sectors that have come back to full capacity - what they were running at in April of last year - are financial companies, banks," Subramanian said.