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Good News for Bank Profits

By Anand Chokkavelu, CFA – Updated Apr 7, 2017 at 12:50PM

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In today's edition of "Talking Stocks," analysts Andrew Tonner and Anand Chokkavelu look at the good news for bank profits today: a growing interest-rate spread.

The New York Times reports that the interest-rate spread has doubled from 2007 to today. This is good news for banks' profits and creates an environment for them to be more conservative while also keeping more profits. It could explain why you see companies such as Wells Fargo placing big bets or mortgages right now. Prudently managed banks such as Wells could see a nice upside surprise in the next few quarters, and at today's prices, that leaves a lot of room on the upside for the long-term investor.

With so many of the big finance firms getting bad press these days, you may be inclined to stay away from the sector entirely, but that could be a huge mistake. In fact, some of the best opportunities over the next few years can be found there, including one small, under-the-radar bank. It's been called one of The Stocks Only the Smartest Investors Are Buying. You can learn about it, and more, in our exclusive free report. Just click here to keep reading

Anand Chokkavelu has no positions in the stocks mentioned above. Andrew Tonner owns shares of Wells Fargo. The Motley Fool owns shares of JPMorgan Chase and Wells Fargo and has options on Wells Fargo. Motley Fool newsletter services recommend Wells Fargo. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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