Banks with large mortgage banking platforms like Wells Fargo, US Bancorp, JPMorgan, Fifth Third (FITB) and PNC Financial (PNC) should continue to be supported by refinancing and home buying activity, noted Miller.
In fact, earnings results reinforce Buffett's forecasts for the housing market. In a July 12 CNBC interview, Warren Buffett said that while economic growth has fallen to a standstill, he is seeing a pickup in residential housing, in a comment on the economy that may also be reflected in bank earnings.
"The general economy in the United States has been more or less flat, and so the growth has tempered down. But the residential housing, we're seeing a pickup. It's noticeable. It's from a very low base," said Buffett, who noted that his tempered optimism was a 'flip-flop" from his outright bullishness on housing in 2011.
Many bank and housing sector analysts agree. On Monday, Goldman Sachs analysts upgraded their earnings estimates for homebuilders like KB Home (KBH) and M.D.C. Holdings (MDC,), citing a "strong US housing recovery."Fundamental stock investors may also have reason to follow Buffett. Following the results of the Federal Reserve stress tests in March, it was many of Buffett's investments like Wells Fargo and US Bancorp, which led the way on share buyback plans and dividend boosts. Wells Fargo boosted its dividend 83% and indicated accelerated a buyback program launched in 2011. Meanwhile U.S. Bancorp boosted its dividend by 56% and targeted $3.3 billion in buybacks. For more on the contrasts between U.S. bank earnings and business models, see why Warren Buffet shuns investment banks. See why Barclays' scandal was born out of a derivatives bet for more on Libor litigation. -- Written by Antoine Gara in New York