For most of 2016, the financials lagged the overall market, but after the presidential election they took off like they were shot out of a cannon. The combination of the Donald Trump victory and the expectation for rising interest rates lit the fuse for a furious rally. While the rally stalled a little this week, most on Wall Street are still very positive on the sector in 2017.

In a new research report, Deutsche Bank stays positive on the sector for the most part, but with the caveat that they prefer the market sensitive banks over the large regional ones. They explain why in the research:

The preference for Market Sensitive banks reflects our view that leverage to rising rates may already be mostly (or more) priced in while there may still be upside to capital market businesses from a stronger economy and a less onerous regulatory environment.

Four top companies make the Deutsche Bank Buy list for 2017.

Goldman Sachs

This continues to be the gold standard of Wall Street banks and trades at a reasonable 13 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.

In investment banking, the company has the preeminent client franchise. Goldman Sachs advised on more than $1.5 trillion of announced mergers and acquisitions transactions last year, the highest level the bank has ever recorded. It also has maintained a leading market share over the past 25 years. It maintained a market position when merger and acquisition activity was dominated by technology in 1999, by financials in 2008 and by natural resources in 2014. The bottom line is, regardless of where market strength is in any given year, Goldman Sachs is up to the task.

Goldman Sachs reported third-quarter numbers that hammered analysts’ estimates. And an improving capital market bodes well for a firm that is a leader in the IPO world.

Goldman Sachs shareholders receive a 1.08% dividend. The Deutsche Bank price target for the stock is $255, and the Wall Street consensus target is $227.12. Shares closed Thursday at $240.12.

JPMorgan

This stock trades at a reasonable 13.2 times estimated 2017 forward earnings and could respond well in a rising rate scenario. JPMorgan Chase & Co. (NYSE: JPM) is expected to continue to benefit from commercial loan growth and an upturn in capital spending. Wall Street analysts agree that the stock seems attractively valued on estimated price-to-earnings and a very solid price-to-book value. Some on Wall Street have cautioned that last year’s divestiture of the physical commodities business could provide earnings headwinds going forward.

The company reported outstanding third-quarter results, and Merrill Lynch thinks the results are sustainable going forward. The firm raised its estimates for 2017 and feels JPMorgan can earn as much as $7 a share by 2018. Despite being a crowded trade, Merrill Lynch also feels that the bank’s superior earnings growth should continue the stock’s outperformance.

Improvement in loan growth, terrific equity capital markets and a steady increase in deposits will be a solid plus. Trading at a discount to many of the large cap banks on 2016 earnings estimates helps upside potential as well. With $2.6 trillion in assets on a worldwide basis, and one of Wall Street’s savviest leaders in Jamie Dimon, the stock is a solid buy for investors.

Earlier this year, Dimon put his money where his mouth was and reportedly bought a stunning 500,000 shares of JPMorgan stock for a massive $26 million. That brought his total holdings in the bank to 6.7 million shares, worth over $360 million.

Investors receive a 2.27% dividend. Deutsche Bank has a $90 price target, and the consensus target is $80.45. Shares closed yesterday at $86.89.

Huntington Bancshares

This smaller cap bank could be an outstanding addition for more aggressive portfolios. Huntington Bancshares Inc. (NASDAQ: HBAN) operates as a holding company for the Huntington National Bank, which provides commercial, small business, consumer and mortgage banking services. Its Retail and Business Banking segment offers financial products and services, including checking accounts, savings accounts, money market accounts, certificates of deposit, consumer loans and small business loans, as well as investments, insurance, interest rate risk protection and foreign exchange and treasury management services.

The company’s Commercial Banking segment provides corporate risk management and institutional sales, trading, and underwriting services; commercial property and casualty, employee benefits, personal lines, life and disability, and specialty lines of insurance; and brokerage and agency services for residential and commercial title insurance, as well as excess and surplus product lines of insurance.

Huntington also offers automotive and commercial real estate financing, and a regional private bank and private client business.

Deutsche Bank noted that the stock still trades at a 5% discount to peers on 2017 estimates earnings and a whopping 13% on 2018 estimated earnings. The report said:

We think the devaluation reflects concerns surrounding its indirect consumer auto book (at ~16% of loans) and lingering concerns related to the recently closed acquisition. We continue to think this devaluation is overdone. Our view largely reflects stronger economic growth, stable credit in the banks auto book (especially given an average FICO score of 760) and good execution from mgmt on integration and cost savings.

Investors receive a 2.4% dividend. The Deutsche Bank price objective is set at $15. The consensus target is $13.69. The stock ended Thursday at $13.

Wells Fargo

This large cap bank is another stock for investors to look at now for safety, dividends and solid upside potential. 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, and he raised his holdings in the bank to 10% on the stock’s weakness earlier this year.

The company reported inline third-quarter results and earnings revisions, which didn’t go over well after the other major banks posted big earnings. Wells Fargo also had a recent public relations headache as it was revealed that employees allegedly opened up client accounts that were not approved. Things got worse recently as its CEO was absolutely eviscerated at a congressional hearing by politicians and ended up resigning.

While the stock has rallied off the lows, it probably the most affordable of all the major banks, and Deutsche Bank feels that the headline risk is long since priced in.

Shareholders are paid a 2.73% dividend. The $60 Deutsche Bank price target compares with the consensus target of $55.50. Shares closed Thursday at $55.75.

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Given the huge rally since the election of Donald Trump, investors may want to take partial positions here and see if we don’t see some selling in the last week of December or early January.

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