Longtime investor and trader Jim Lebenthal said he’s favoring big banks over small lenders heading into the earnings season. “The big banks should have been beneficiaries of what went on last month with Silicon Valley Bank and Signature Bank, meaning they got deposit inflows from the smaller banks,” Lebenthal said. “I think we should favor the big banks over the smaller banks just because of their overall strength.” See the video above for Lebenthal’s full view of the sector and his favorite picks. The first-quarter earnings season kicks off on Friday with JPMorgan , Citigroup , Wells Fargo and PNC Financial reporting quarterly numbers. From these reports, Lebenthal said he will be assessing the health of the banking system as well as the macroeconomic health of the consumer. He is a partner at Cerity Partners, managing U.S. equity portfolios for clients and advises them on asset allocation. “I’d like to hear from both the big banks and PNC … how they’re all feeling about the health of the banking system,” Lebenthal said. “Is there further pressure on balance sheets? Are there further deposit outflows not just from small banks to big banks, but from all banks to money market funds?” The collapses of Silicon Valley Bank and Signature Bank last month — the second- and third-largest bank failures in U.S. history, respectively — made investors concerned about the overall health of the banking systems and if more institutions are at risk. Lebenthal said there is one overlooked silver lining for the banking sector, which is declining bond yields. Lower rates would increase the value of Treasury securities on the bank’s balance sheets, Lebenthal said. The investor called JPMorgan the “creme de la creme” in the banking system and said he owns Citigroup as a value and turnaround play. He said he doesn’t have any individual stock exposure to regional banks but he does own a small position in the SPDR S & P Regional Banking ETF.
