NEW YORK ( TheStreet) -- Although financials have led the market higher for most of 2013, they have underperformed the broader market over the past month.
Jim Cramer and Stephanie Link, co-managers of Cramer's charitable trust, Action Alerts Plus, said financials have been lagging due to concerns over loan growth and loan demand. Cramer pointed out that some of the big banks will make a fortune should interest rates go higher.
However, it's a very thin line, he added. While banks should benefit from higher interest rates, as
CEO Jamie Dimon has said, it could crimp a bank's mortgage business such as
(WFC - Get Report)
. Both JPM and WFC are trust holdings.
Cramer added that while banks are on the cusp of achieving solid net interest margins, some hesitation still remains.
Link noted that the trust trimmed some of its exposure in Wells Fargo since it swelled into too big of a position and moved money into another holding,
American International Group
(AIG - Get Report)
The company has three main catalysts to push shares higher, she said: Strong cash flow, an excellent CEO in turnaround situations, and a potential $5 billion sale of International Lease Finance to a Chinese consortium.
Cramer added that for regional banks to do better, a slow and moderate rise in interest rates would be best, but warned too high of a rise too fast would hurt their mortgage business.
-- Written by Bret Kenwell in Petoskey, Mich.