It’s time for investors to shake off the fear of bank stocks created by last year’s deposit outflows and regional bank failures, according to Oppenheimer. Analyst Chris Kotowski said in a report to clients on Tuesday that bank stocks are “significantly undervalued,” highlighting that the KBW Bank Index finished 2023 down 4.8% for the year, or 29 percentage points behind the S & P 500. That gap is too large to justify even with the collapse of a few regional banks such as Silicon Valley Bank, Kotowski said. “Yes, of course we all remember the events of March [2023] and the breathtaking speed at which SVB and two other small banks collapsed, but if anything, the year has borne out the stability of the universal bank business model. The six big banks in our composite ended up generating core earnings of $164 [billion] versus our expectations of $146B that we published in our 4Q22 review published this time last year,” the 62-page report said. Even some of the midsize banks that struggled in 2023 could see their underlying business rebound, according to Kotowski. “The rewards are not evenly divided with the bigger banks doing much better than the regionals and JPM doing best of all. However, we would attribute a significant portion of the challenges at the smaller regionals to hedging and positioning decisions made mainly in 2H22 than to inherent industry fundamentals. The fundamentals remain pretty good,” the report said. Still, Oppenheimer recommended that investors focus on the bigger players in the sector. The firm’s top two bank stocks are Goldman Sachs and Jefferies , both of which can serve as a bet on a rebound in the capital markets business. Those stocks are up 5.9% and 6.5%, respectively, over the past 12 months. Wall Street is split on Goldman, with 13 analysts giving the stock a buy or strong buy rating, while 12 rate it a hold, according to data from LSEG, formerly known as Refinitiv. Larger strategic questions about the bank and embattled CEO David Solomon may be holding the stock back even if the bank’s recent financial results are strong. Jefferies is thinly covered by Wall Street, but three of the four analysts tracked by LSEG have buy ratings on the stock. Both Jefferies and Goldman offer a dividend yield of nearly 3%. Kotowski also recommended several other large bank stocks, including Bank of America , JPMorgan Chase and U.S. Bancorp . JPMorgan has been the best performer of those three so far this year, rising about 1.5% in January as of Monday’s market close. JPM YTD mountain Shares of JPMorgan Chase have been trending higher in January. — Additional reporting by CNBC’s Michael Bloom.