NEW YORK ( TheStreet) -- While the broader market has cobbled together a nice run since Sept. 1, major financial stocks have been largely sitting out the rally. Though the S&P 500 has tacked on 11% and the tech-heavy Nasdaq has enjoyed gains of more than 14%, the big banks haven't kept pace. Laggard Bank of America ( BAC) shares have actually been in the red over the last 10 weeks despite Wall Street's surge.But while other sectors have been stealing the spotlight, financials could turn around in coming months. A convergence of seven major trends could create a favorable environment for banks that create short-term and long-term profit opportunities. Here are seven big reasons to buy banks now, before they take off:
So don't wait until the institutional buyers bid up prices before you dip into bank stocks. You want to be ahead of the quantitative surge that lifts the entire sector by buying in now.
U.S. Bancorp ( USB) profits leaped nearly 50% in the third quarter from a year earlier, and revenue grew 8% thanks to $54.8 billion in new lending activity. The earnings of $894 million equated to 45 cents a share and easily topped estimates.
As the Fed ratchets up interest rates, banks will actually be able to increase their capital base and draw in conservative investors who are content earning 3% a year on a CD or high-yield savings account. This is a long-term trend that will take time to play out, but surely a good one for bank stability -- and thus share prices. The flip side is that higher interest rates could discourage lending and weigh on banks, but frankly with little lending at near-zero rates, that's not a very convincing argument. As of this writing, Jeff Reeves did not own a position in any of the stocks named here.