It certainly has been a positive day of trade for the banking sector.
Strong gains by the big four banks on Thursday are helping to drive the S&P/ASX 200 Index (ASX: XJO) notably higher.
What is happening?
Here's the state of play in the banking sector this afternoon:
The Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price is up 4.5% to $23.82.
The Commonwealth Bank of Australia (ASX: CBA) share price is up 2.5% to $84.86.
The National Australia Bank Ltd (ASX: NAB) share price is up 3% to $23.11.
The Westpac Banking Corp (ASX: WBC) share price is up 4.5% to $20.22.
Why are the banks charging higher?
Today's gains appear to have been driven by a broker note out of Citi in the United States.
According to the AFR, Citi doesn't believe the big four banks' rally is over and remains positive on the investment opportunity with them. Particularly given its belief that they will soon resume paying out up to three-quarters of their profits as dividends.
Citi is most positive on ANZ and Westpac. The broker has retained its conviction buy ratings on the two banks.
It has, however, downgraded NAB's shares to neutral following its strong share price rally over the last three months.
The broker explained: "NAB is now trading at 1.2 times book value or at about a 20 per cent premium to both ANZ and Westpac for a similar sustainable profitability profile."
Though, it is worth noting that NAB isn't the broker's least preferred bank. That title goes to Commonwealth Bank. Citi believes the market has already fully priced in a restoration of dividends, excess capital, and underlying earnings growth.
It also warned that Commonwealth Bank's shares could underperform as investors look for stronger returns.
Citi commented: "A recovering bank sector will test CBA's perceived 'safe haven' status as investors seek more upside in other names."
