Updated from Dec. 14.

Financial stocks can finally breathe a sigh of relief now that the Federal Reserve has raised interest rates for the first time in nearly 10 years. Yet, investor focus is already shifting from who benefits from a rate hike to "what the environment looks like after the first rate hike," according to Goldman Sachs.

"It remains up in the air what the Fed's commentary and global macro data over the next several months will imply about the pace of rate hikes and the shape of the yield curve," analysts wrote in a Dec. 4 note to clients. "It does however seem likely that after a prolonged period of low dispersion in financial stocks and the resulting low levels of position turnover in the wait leading up to the rate hikes, the many potential tightening outcomes (e.g., steeper, flattener, gradual pace, one & done, etc...) will make stock picking more critical in 2016."

The analysts noted six financial stocks it considers "top picks" based on higher rates. But the note also mentioned other financial stocks set to benefit once the Fed lifts rates.

Raymond James Financial (RJF - Get Report) , Bank of New York Mellon (BK - Get Report) , Northern Trust (NTRS - Get Report) , and Bank of America (BAC - Get Report) are "best-positioned in the event of a 'one-and-done'" rate hike as stocks that "get most of the earnings upside from rates in the initial hikes rather than relying on normalized rates," the analysts wrote.

"Deposit betas could be a source of underappreciated upside as we do not believe banks will pass on a large part of the initial 50 basis point [rise]" to customers, the analysts wrote, with JPMorgan Chase (JPM - Get Report) , Bank of America, Wells Fargo (WFC - Get Report) , PNC Financial Services (PNC - Get Report) and E*Trade Financial (ETFC - Get Report) most exposed.

Also once the markets get more clarity surrounding interest rates, that and the combination of increased economic confidence "should propel more proactive behavior from management teams in the name of growing ROEs/earnings," the note read. Goldman's favored "self-help stories" for 2016 included AIG (AIG - Get Report) , Ally Financial (ALLY - Get Report) , Oaktree Capital (OAK - Get Report) , Voya Financial (VOYA - Get Report) and Zion Bancorp (ZION - Get Report) "where we see cost-cutting, increased capital return, and de-risking the drivers."

Goldman's top stock picks on higher rates are paired below with ratings from TheStreet Ratings, TheStreet's proprietary ratings tool, for another perspective. And when you're done check out how Deutsche Bank analysts expect a rate hike to play out for financial services stocks.

TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equity market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a buy yielded a 16.56% return in 2014, beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a buy yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

BAC Chart BAC data by YCharts

1. Bank of America (BAC - Get Report)
Industry: Financial Services/Diversified Banks
Year-to-Date Return: -4.4%

TheStreet Said: TheStreet Ratings team rates BANK OF AMERICA CORP as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

We rate BANK OF AMERICA CORP (BAC) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, attractive valuation levels, good cash flow from operations, solid stock price performance and impressive record of earnings per share growth. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Commercial Banks industry. The net income increased by 2043.1% when compared to the same quarter one year prior, rising from -$232.00 million to $4,508.00 million.
  • Net operating cash flow has significantly increased by 7856.00% to $34,902.00 million when compared to the same quarter last year. In addition, BANK OF AMERICA CORP has also vastly surpassed the industry average cash flow growth rate of 310.31%.
  • After a year of stock price fluctuations, the net result is that BAC's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • BANK OF AMERICA CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, BANK OF AMERICA CORP reported lower earnings of $0.35 versus $0.91 in the prior year. This year, the market expects an improvement in earnings ($1.43 versus $0.35).
  • You can view the full analysis from the report here: BAC

 

JPM Chart JPM data by YCharts

2. JPMorgan Chase  (JPM - Get Report)
Industry: Financial Services/Diversified Banks
Year-to-Date Return: 4.6%

TheStreet Said: TheStreet Ratings team rates JPMORGAN CHASE & CO as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

We rate JPMORGAN CHASE & CO (JPM) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, increase in net income, good cash flow from operations and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • JPMORGAN CHASE & CO has improved earnings per share by 24.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, JPMORGAN CHASE & CO increased its bottom line by earning $5.28 versus $4.32 in the prior year. This year, the market expects an improvement in earnings ($5.98 versus $5.28).
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Commercial Banks industry average. The net income increased by 22.3% when compared to the same quarter one year prior, going from $5,565.00 million to $6,804.00 million.
  • Net operating cash flow has significantly increased by 1125.88% to $25,124.00 million when compared to the same quarter last year. In addition, JPMORGAN CHASE & CO has also vastly surpassed the industry average cash flow growth rate of 310.31%.
  • The gross profit margin for JPMORGAN CHASE & CO is currently very high, coming in at 89.85%. Regardless of JPM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 27.66% trails the industry average.
  • You can view the full analysis from the report here: JPM

 

NTRS Chart NTRS data by YCharts

3. Northern Trust  (NTRS - Get Report)
Industry: Financial Services/Asset Management & Custody Banks
Year-to-Date Return: 7.5%

TheStreet Said: TheStreet Ratings team rates NORTHERN TRUST CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

We rate NORTHERN TRUST CORP (NTRS) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 5.6%. Since the same quarter one year prior, revenues slightly increased by 6.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • NORTHERN TRUST CORP has improved earnings per share by 14.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, NORTHERN TRUST CORP increased its bottom line by earning $3.32 versus $2.99 in the prior year. This year, the market expects an improvement in earnings ($3.82 versus $3.32).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 14.7% when compared to the same quarter one year prior, going from $204.50 million to $234.60 million.
  • The gross profit margin for NORTHERN TRUST CORP is currently very high, coming in at 97.75%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 19.67% is above that of the industry average.
  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • You can view the full analysis from the report here: NTRS

RF Chart RF data by YCharts

4. Regions Financial (RF - Get Report)
Industry: Financial Services/Regional Banks
Year-to-Date Return: -10.5%

TheStreet Said: TheStreet Ratings team rates REGIONS FINANCIAL CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

We rate REGIONS FINANCIAL CORP (RF) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels, solid stock price performance, good cash flow from operations and expanding profit margins. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • RF's revenue growth has slightly outpaced the industry average of 3.2%. Since the same quarter one year prior, revenues slightly increased by 0.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has slightly increased to $798.00 million or 2.96% when compared to the same quarter last year. Despite an increase in cash flow of 2.96%, REGIONS FINANCIAL CORP is still growing at a significantly lower rate than the industry average of 310.31%.
  • After a year of stock price fluctuations, the net result is that RF's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The gross profit margin for REGIONS FINANCIAL CORP is currently very high, coming in at 91.06%. Regardless of RF's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, RF's net profit margin of 18.45% is significantly lower than the industry average.
  • You can view the full analysis from the report here: RF

 

SCHW Chart SCHW data by YCharts

5. Charles Schwab  (SCHW - Get Report)
Industry: Financial Services/Investment Banking & Brokerage
Year-to-Date Return: 9.2%

TheStreet Said: TheStreet Ratings team rates SCHWAB (CHARLES) CORP as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

We rate SCHWAB (CHARLES) CORP (SCHW) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, growth in earnings per share, increase in net income and good cash flow from operations. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 5.6%. Since the same quarter one year prior, revenues slightly increased by 6.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • SCHWAB (CHARLES) CORP has improved earnings per share by 16.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, SCHWAB (CHARLES) CORP increased its bottom line by earning $0.96 versus $0.78 in the prior year. This year, the market expects an improvement in earnings ($0.99 versus $0.96).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 17.1% when compared to the same quarter one year prior, going from $321.00 million to $376.00 million.
  • 40.90% is the gross profit margin for SCHWAB (CHARLES) CORP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 23.12% is above that of the industry average.
  • Net operating cash flow has increased to $1,091.00 million or 10.53% when compared to the same quarter last year. Despite an increase in cash flow of 10.53%, SCHWAB (CHARLES) CORP is still growing at a significantly lower rate than the industry average of 275.70%.
  • You can view the full analysis from the report here: SCHW

 

ZION Chart ZION data by YCharts

6. Zion Bancorp (ZION - Get Report)
Industry: Financial Services/Regional Banks
Year-to-Date Return: -2.5%

TheStreet Said: TheStreet Ratings team rates ZIONS BANCORPORATION as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

We rate ZIONS BANCORPORATION (ZION) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, good cash flow from operations, solid stock price performance and growth in earnings per share. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • ZION's revenue growth has slightly outpaced the industry average of 3.2%. Since the same quarter one year prior, revenues slightly increased by 1.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Commercial Banks industry average. The net income increased by 5.3% when compared to the same quarter one year prior, going from $95.89 million to $101.00 million.
  • Net operating cash flow has slightly increased to $212.52 million or 7.20% when compared to the same quarter last year. Despite an increase in cash flow of 7.20%, ZIONS BANCORPORATION is still growing at a significantly lower rate than the industry average of 310.31%.
  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • ZIONS BANCORPORATION's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, ZIONS BANCORPORATION increased its bottom line by earning $1.70 versus $1.58 in the prior year. For the next year, the market is expecting a contraction of 29.4% in earnings ($1.20 versus $1.70).
  • You can view the full analysis from the report here: ZION