Citi Initiates Several Pair Trades to Play the Banks

October 4, 2022 5:53 AM EDT

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Citi analyst Keith Horowitz initiates several pair trades to play the banks:

"We initiate Overweight CMA / Underweight RF as there is a wide discrepancy in the implied CoE between these two regional banks that are well positioned for higher rates and large potential buybacks. We expect to see some valuation mean reversion.

We see risk to market sensitive revenues in the current environment, and we initiate Overweight BK / Underweight NTRS as we see greater risk for downward revisions at NTRS. Additionally, NTRS trades at the lowest implied CoE in our universe, while BK trades among the highest.

We are also closing Overweight WFC / Underweight USB as our thesis that the rapidly rising rate environment would benefit WFC greater than USB has largely played out."

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