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The recent sharp rise interest rates has created a buying opportunity in some financial stocks, according to Bank of America. Surging bond yields have the potential to slow the U.S. economy and damage the financial sector, weighing on bank stocks. The Financial Select Sector SPDR Fund (XLF) is already down 6.7% over the past month. But Bank of America analyst Ebrahim Poonawala said in a note to clients Wednesday that some stocks have fallen far enough that investors who can stomach the volatility should turn buyers. “We see it as almost impossible in the near term for bank stocks to disconnect with the price action in [U.S. Treasury] yields. However, we believe the sell-off has created an attractive risk/reward for longer-term investors in certain stocks that are trading near [tangible book value], while also operating with healthy capital cushions,” the note said. Tangible book value is a way of comparing a bank’s equity market value to the assets on its balance sheet. When the ratio approaches one, banks are typically considered undervalued. The stocks that Bank of America highlighted as trading at this attractive level include Wells Fargo , Goldman Sachs , First Horizon and East West . Every name in that group is down at least 6.5% over the past month, with First Horizon seeing the steepest drop, down 18.7%. — CNBC’s Michael Bloom contributed reporting.
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