These banks stocks are a great pick amidst inflation and Ukraine war

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The rising rate environment is broadly known to be good for the banks but not all banks were made equal, said KBW’s Tom Michaud, as he suggested that investors be selective when picking stocks.

Why regional banks are a better pick?

Amidst the double whammy of record inflation and the ongoing war in Ukraine, Michaud sees regional banks as a better pick compared to their larger investment banking peers. On CNBC’s “Squawk on the Street”, he said:

We’re bullish on large regional and regional banks that are spread lenders. Higher rates will be very good for them. We’re looking for double-digit revenue growth for regional banks. They’ve been the best performing stocks within financials. We think things are playing out right for them.

Unlike their multinational peers, regionals are also more insulated from the impact of the current geopolitical tensions.

Which stocks in particular does he like?

Michaud agreed the tangible common equity was still reasonable for the big investment banks but cited “deceleration” for not recommending those stocks. He added:

What we like is Comerica, M&T, PacWest, Western Alliance, East West Bancorp, which are banks that generally don’t have a lot of mortgage exposure and they also don’t do a lot of lending to subprime consumer.

The U.S Fed is expected to kickstart the rate hike cycle with a 25 basis points increase this week. Inflation climbed to 7.9% in February.

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