Bank Stocks Explode: 15% Gains in 10 Days Before Fed Cuts!​

Bank Sector Trend Review: the Cycle Rises Again, Valuation Fixes Drive Collective Upside

Since June 2025, the U.S. banking sector has significantly outperformed the broader market, especially the shares of systemic banks (JPM, BAC, C, WFC) and investment banking duo (GS, MS) have recorded gains of 5%-15%, with $SPDR S&P Bank ETF(KBE)$ and the large bank ETF $Invesco KBW Bank ETF(KBWB)$ rising about 11% and 13% respectively, strongly reflecting the warming market sentiment and the sector's valuation repair. KBWBrose about 11% and 13%, respectively, strongly reflecting the rebound in market sentiment and sector valuation repair.

Key drivers

1. Strengthened expectations of spread widening:

   Although the Federal Reserve has not yet made clear the timetable for interest rate cuts, but inflation data continue to fall to strengthen the probability of interest rate cuts during the year.In the "debt before interest" environment, long-term interest rates remain high, short-term interest rates decline, the interest rate curve tends to steepen, spreads open space, helping banks to improve net interest margins.

2. Economic soft landing is expected to strengthen:

   U.S. economic growth is moderate but stable, with resilient employment and consumption supporting credit demand, while credit quality remains flat, leading to an inflection point in fundamentals as banks' loan growth and asset quality are expected to rebound.

3. Eased regulatory expectations and more positive returns on capital:

   Market concerns eased significantly as the Basel III Endgame rules, originally scheduled for implementation in 2025, faced delays and adjustments.Meanwhile, a number of large banks are planning buybacks and dividends to enhance the attractiveness of shareholder returns.

4. AI and HNW wealth management bring a "new revenue curve":

   Morgan Stanley, JPMorgan Chase and others continue to strengthen their HNW client management, asset allocation and AI-enabled service capabilities, driving the expansion of non-interest income.

Individual stock analysis

$JPMorgan Chase(JPM)$ Solid King, Pricing Power Strengthens Again

• Stock performance: up ~+9% since June, another all-time high.

• Highlight Analysis:

  JPM continued to consolidate its leading positioning of "quality assets + strong execution + cross-cycle profitability".Benefiting from its large deposit base and diversified business structure, JPM still outperforms its peers in terms of net interest margin even in a high interest rate environment.

• In terms of capital program: CEO Jamie Dimon is clear that it will increase share buybacks; it also continues to outperform in terms of asset quality and risk exposure control.

• Points of concern: its AI-driven retail banking and institutional client management platform is optimizing cost structure and user stickiness, which could further drive efficiency gains in the future.

$Goldman Sachs(GS)$ Investment banking home turf returns, wealth management a highlight

• Stock performance: up ~+13% in June, significantly outperforming the sector.

• Highlight analysis:Goldman Sachs' traditional strength, investment banking, rebounded rapidly as IPO market and M&A deals rebounded. 2025 IPO activity in the US has risen sharply since Q2, and GS has benefited strongly as a top-tier underwriter.

• The gradual expansion of contribution from the wealth management side and continued record high AUM, coupled with AI tools to enhance advisory and risk control efficiency, supported the valuation repair.

• Potential downside: still need to be alert to the impact of risk asset volatility and profit fluctuations in the commodities business on overall volatility.

$Morgan Stanley(MS)$ Wealth Management Accelerates Leverage Release, Stabilizes High Growth

• Stock performance: up ~+11% since June.

• Highlight analysis: MS has been effective in its strategic transformation in recent years, with wealth management and investment management revenues accounting for more than 50% of the total, counteracting the revenue uncertainty caused by trading volatility.

• Strengths lie in strong HNW client stickiness and high service stickiness, and the effects of its integration of E*TRADE and Eaton Vance are gradually materializing.

• Risk control performance is excellent, while AI and digitalization drive customer conversion rates, representing high-quality growth in the medium to long term.

$Bank of America(BAC)$ Highly leveraged rally, valuation resilience unleashed

• Stock Performance: Up ~+12% in June, one of the most resilient banks in the recent rally.

• Highlight analysis: BAC has benefited significantly on expectations of improved spreads.As it is highly sensitive to net interest margins, the widening of short- and long-term spreads has significantly benefited its core profitability.

• Strong valuation repair: Previously, asset duration mismatch was a concern for the market, but the stabilization of the U.S. bond market since June has contributed to the reversal of market sentiment.

• Potential concerns: Commercial real estate exposure and some low credit loans still need to be closely watched, but resilience can be expected after systemic concerns subside.

$Citigroup(C)$ Restructuring pays off, valuation still in early stages of restoration

• Stock performance: up ~+8% in June, but still below 2019 highs.

• Highlights: CEO Jane Fraser's strategy of "slimming + focusing" continues, with the company exiting some emerging markets, shrinking its consumer business, and focusing its resources on institutional client services.

• Valuation advantage is obvious, the current PB is less than 0.6 times, and there is room for "catching up" in the overall rebound sentiment.

• Risk warning: short-term earnings are still unstable, need to observe the sustainability of the improvement of revenue structure and asset quality in the next few quarters.

$Wells Fargo(WFC)$ Valuation Revaluation Window for Mortgage Majors

• Stock Performance: Up +10% in June as market expectations gradually repair.

• Highlights: WFC has traditional strengths in the housing credit market, and with the gradual stabilization of U.S. mortgage rates and the gradual recovery of the housing market, its earnings momentum has been restored significantly.

• Management's efficiency reforms are showing results, and regulatory constraints due to scandals over the past few years are being eased, with some asset growth constraints expected to be lifted in the future.

• The challenge is: high dependence on interest rate spreads, before the real opening of the easing cycle, ROE improvement space is limited.

From spread logic to earnings stability, bank stocks open a new round of pricing revaluation

In the current macro environment, large banks have benefited from warming fundamentals, easing policy expectations and diversified earnings structures, forming a strong resonance.Systemic leaders (e.g. JPM, MS) continue to maintain a high valuation premium by virtue of their robust structure and high-end customer resources; while large banks (e.g. C, BAC) whose valuations are still at a low level are highly resilient.The sector as a whole is in a golden convergence period of valuation repair + performance reversal.

Follow-up attention to three core variables

• Whether the path of interest rates evolves "steadily and slowly" as expected;

• Whether asset quality and commercial real estate risks are manageable;

• Whether big banks can further improve operational efficiency and expand non-interest income sources under AI drive.

Until these variables become clear, U.S. bank stocks are expected to continue to gain capital as low valuation + high Beta add-on targets.