There's an ASX sector that's run hot the past few months but is set to continue the party for a while yet.
That's according to WAM Leaders Ltd (ASX: WLE) portfolio manager Matthew Haupt, who is "still very pretty positive" on Australian banks.
After 6 months of gains, Haupt admitted the value isn't as obvious. But forthcoming capital management looks like low-hanging fruit for investors.
"We actually haven't seen them enact capital management," he told a Wilson Asset Management video briefing.
"[But] we will see them over the next 3 to 6 months really start to give back some of that excess capital."
Haupt forecast that Commonwealth Bank of Australia (ASX: CBA) would launch an off-market share buyback with "a large franking component".
"National Australia Bank Ltd (ASX: NAB), I think, will do smaller, bite-sized buybacks over the next few years."
Another positive for the banks is that provisions taken on during the COVID-19 downturn will wind back as the Australian economy roars back.
"There's still legs in the financial trade," said Haupt.
"It's probably done most of its work but you can easily see another 10% to 15% upside from here — all else being equal in the current environment."
CBA shares were up 0.76% to close Thursday at $101.85. The NAB share price ascended 0.23% to finish the day at $26.62.
Which bank?
However, with valuations stretched, caution should be exercised with which bank shares investors now plough into.
In the latest Ask A Fund Manager, Sage Capital portfolio manager Sean Fenton picked CBA as the most overrated stock on the ASX currently.
He said that Commonwealth is "the highest quality bank in Australia, they're the best long-term earnings track record, probably the best technology platform and systems and some of the best growth".
But the share price has run up too much, for his liking.
"It's not often you see a bank trading over 20 times earnings," he told The Motley Fool.
"There is nothing wrong with the way they're running their business. But it's the premium to the rest of the sector… The market's fallen a little bit too much in love with that quality at the moment, and it's very hard to be sustained, particularly if you do see a bit of inflation and rate tightening down the track."
WAM Leaders is Wilson Asset Management's large-cap listed investment company. Its shares ran up 0.32% on Thursday to close the session at $1.54.
