At present, investors are mostly shying away from the bank stocks given the lower interest rate environment. After raising interest rates four times in 2018, the Federal Reserve reversed its stance and cut rates in July, September and October this year. Though it is widely expected that there will be no further rate cut when the Fed officials meet next week, the three cuts have largely offset the favorable impact of last year’s higher rates.
Additionally, several other macroeconomic matters, including the ongoing U.S.-China trade conflict, Brexit ambiguity and global slowdown fears weigh on investors’ sentiments. These factors have also resulted in a slowdown in capital investments by corporates.
Despite these near-term concerns, strong fundamentals and prospects make several banks a good investing option. But before we check out those banks, let’s dig into the factors are likely favorably impact their performance.
Digitization of Operations: Banks are undertaking several measures to improve operating efficiency. For this, banks are digitally improving product offerings and services. Also, they are taking steps to upgrade technology at ATMs and branches, making these more client friendly. Though these initiatives will result in higher expenses in the near term, these are expected to support financials going forward.
Inorganic Expansion: Backed by less stringent financial regulations and large amount free cash available…