While there are still plenty of earnings reports to come, the financials for the most part are done for the quarter, and analysts have had a chance to review that data and make some observations as we are now into the second half of the year. One thing is for sure: Interest rates, which have moved somewhat higher, are still at generational lows, and some banks that analyst felt may be winners in a higher rate scenario may have to wait for some time.

A new research report from Deutsche Bank takes a long look at the results, and the analysts feel that one group looks like a superb bet for the rest of 2017. They noted this in the report:

We continue to believe that capital market businesses have the most leverage to less regulation and a stronger economy. At the same time, we worry most regionals are overly dependent on higher rates with little underlying growth besides net interest margin expansion. Within the Market Sensitive group, we continue to prefer names with leverage to fixed income, currencies and commodities (FICC) trading, and where there’s good operating leverage.

Four top stocks are among those rated Buy, and they all have solid capital markets exposure.

Goldman Sachs

This continues to be the gold standard of Wall Street banks and trades at a reasonable 12.1 times estimated 2017 earnings. Goldman Sachs Group Inc. (NYSE: GS) has a gigantic institutional equity, debt and derivatives business, an ultra-high net worth clientele, top investment banking and capital markets expertise. The bank continues to be a dominant force around the world and is one of the most sought after in the world. And it is one of the very few that dictate who can be a client at the firm.

The analysts note that despite slower FICC trading in the first half of 2017, other trading areas performed better, and with shares still down 8% year to date, this superb company remains a solid buy for investors wanting a position in financials.

Goldman Sachs shareholders are paid a 1.35% dividend. The Deutsche Bank price objective for the shares is $255, and the Wall Street consensus target is $237.04. The stock closed Wednesday at $222.25 a share.

JPMorgan

This stock trades at a reasonable 13 times estimated 2017 forward earnings and could respond good in a rising rate scenario. JPMorgan Chase & Co. (NYSE: JPM) is one of the leading global financial services firms, and one of the largest banking institutions in the United States, with about $2.6 trillion in assets. The company as it is today formed through the merger of retail bank Chase Manhattan and investment bank JPMorgan.

The firm has many operating divisions, including investment and corporate banking, asset management, retail financial services, commercial banking, credit cards and financial transaction services.

The bank recently raised the dividend to $0.56 from $0.50, which was ahead of Deutsche Bank’s $0.55 estimate. The firm also sees share buybacks of $19.4 billion of stock through 2018, versus their prior estimates of $13 billion.

JPMorgan investors are paid a solid 2.18% dividend. Deutsche Bank has set its price target at $90. The posted consensus target is higher at $94.10. The shares closed Wednesday at $9.93 apiece.

Morgan Stanley

Morgan Stanley (NYSE: MS) posted outstanding second-quarter results, beating on the top and bottom lines, and it may be among the best buys in the banking and investment arena. It is another one of the white glove Wall Street firms that continues to show tremendous growth, and it is running neck and neck with Goldman Sachs as the bank of choice for high-profile initial public offerings.

Trading at a price-to-earnings (P/E) multiple of 13.3 times estimated 2017 earnings, that seems extremely reasonable given the 2017 expectations for EPS growth of more than 15%. The company also has $559 billion in cash equivalents on its balance sheet, versus $287 billion in total debt. The dividend was recently raised, up to $0.25 from $0.20, and the company is expected to buy back $5 billion in stock through 2018.

Deutsche Bank noted this in its report:

Second quarter FICC trading revenues were $1.2 billion (down only 4% year-over-year versus down~15% for peers). Despite the decline in FICC, this was the 5th consecutive quarterly revenue run-rate above management’s target of $1 billion. Other capital markets revenues were better than expected. Separately, wealth management is performing well.

Morgan Stanley investors are paid a 2.12% dividend. The $47 Deutsche Bank price target is likewise less than the consensus price objective of $49.39. The stock closed trading most recently at $47.21.

Wells Fargo

This is another stock for investors to look at now for safety, dividends and solid upside potential, and it was among the biggest winners in the analyst’s view. Wells Fargo & Co. (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.8 trillion in assets. The company provides banking, insurance, investments, mortgage and consumer and commercial finance through 8,700 locations, 12,800 ATMs, the Internet and mobile banking. It also has offices in 36 countries to support customers who conduct business in the global economy. Wells Fargo serves one in three households in the United States.

Wells Fargo has slowly, but surely, become one of the biggest mortgage lending companies in the United States, in addition to its normal banking and brokerage businesses. A continued increase in commercial real estate lending could really boost the bank’s bottom line and overall revenue. The stock also remains a top Warren Buffett holding.

The analysts noted this in the report:

Wells Fargo’s sales issue should be largely behind it. The stock has lagged since the sales issue surfaced (underperforming the Banking index by 20%). We think Its successful Comprehensive Capital Analysis and Review, improvement in the efficiency ratio in the second quarter (with further improvement to come), and an attractive valuation, make the company compelling.

Wells Fargo shareholders are paid a decent 2.85% dividend. The Deutsche Bank price target is $60, above the consensus price target of $57.78 a share. The stock closed most recently at $54.91.

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Sticking with the big capital market leaders makes sense, especially with some volatility creeping back into the overall markets. The long-term outlook for all these companies is solid, and the financial strength that the stress tests and capital allowances confirm make the sector a very solid play for the second half of 2017. In addition, it’s likely that Deutsche Bank might shift current price targets higher.

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