Would you catch a rally in US banks?

US bank stress tests last week have boosted the outlook for the global banking sector, said John Yakas, manager of the Polar Capital Financial Opportunities fund, who urged investors not to miss the rally.

Last Wednesday (14 March) the Federal Reserve released the results of stress tests on 19 large US banks, assessing how their tier one common capital ratios would fare by the end of 2013. As a result, several of the tested banks, including J.P. Morgan and Wells Fargo, announced higher dividends and share repurchase programmes. "This trend also reinforces our view that the stronger will trade on much higher valuations since not only will they offer better growth but also better dividend prospects, since capital constraints will be more limited," said Yakas. Fifteen of the tested bank...