This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

6 Bank Stock Plays for Operation Twist

NEW YORK ( TheStreet) -- Wells Fargo (WFC), JPMorgan Chase (JPM), SunTrust Banks (STI) and City National Corp. (CYN) are the banks best-positioned for a flatter U.S. Treasury yield curve now that the Federal Reserve has flattened it in a move dubbed " Operation Twist," according to a research report published Wednesday from Evercore Partners.

There has been widespread speculation that the Fed will perform Operation Twist -- which would aim to raise short term interest rates while pushing down long-term rates, according to Evercore's note. The hope is that the move would attract foreign capital while keeping financing costs low, the report states.

Overall, Operation Twist would be bad for banks long term because it would negatively impact net interest margins, which represent the difference between banks' cost of capital and what they can charge borrowers.

However, it could offer short-benefits to banks by allowing them to get better returns on new cash coming onto the balance sheet from maturing loans. Those loans have been viewed by the market as having a high "reinvestment risk," because the cash must be reinvested at lower yields than the older loans had been generating.

Banks likely to see the "greatest relief to downside reinvestment risk include those with larger portfolios but shorter durations and a higher concentration of securities maturing in three years," the report states. Examples of such banks include SVB Financial Group (SVB), City National and Commerce Bancshares (CBSH).

Still, Wells, JPMorgan, SunTrust and City National are the best positioned for the new environment because they have "greater top-line diversification and above peer balance sheet growth prospects," according to the report.

-- Written by Dan Freed in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,279.74 +13.75 0.08%
S&P 500 2,010.40 -0.96 -0.05%
NASDAQ 4,579.7890 -13.6380 -0.30%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs