Rate Sensitivity Not Uniformly Priced Into Bank Stocks

Banks release information every quarter on how changing rates might affect their net interest income (NII), but rate sensitivity isn’t consistently priced into their stocks. To some extent this is because rate sensitivity calculations aren’t completely uniform across the sector, but negative headlines that shift investor attention away from basics like NII also plays a role, giving investors the potential for outperformance if rates do go up next year.

Not all bank stocks reflect asset sensitivity

“Why does CMA get credit for rate sensitivity when Bank of America Corp (NYSE:BAC) does not?” ask Bernstein Research senior analysts Kevin St. Pierre and John E. McDonald. “Clearly the CMA story has been easier to tell (and follow). Sit back and rates will eventually...