Credit Suisse's Siegenthaler believes a pullback in the stocks in the wake of earnings is inevitable given their outperformance.
"We believe investors may initially react positively to [first quarter] results ... however we expect the excessive positive sentiment to drive a 10-15% pullback in stock prices after earnings," he says. "While we remain long-term bulls on the U.S. Regional Banks, we are more cautious over the near-term due to excessive sentiment and richer valuations."
In the end, delivering on or exceeding the ramped-up credit quality expectations will take precedence, or as Bank of America Merrill Lynch analysts put it, banks will need to show an "absolute improvement in credit metrics" for their stocks to build on hefty year-to-date gains.
--Written by Laurie Kulikowski in New York.
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