Banks Stocks Well Valued, Invest With 'Caution'

Investors in the banking sector should move "toward a bit more caution," according to a note from Oppenheimer. Analyst Chris Kotowski said that bank fundamentals continue to be "more staid and boring" than they've been in 30 years covering the sector, pointing out that the stocks themselves are valued within historical norms.

Within the sector, JPMorgan Chase & Co. (NYSE: JPM) and SunTrust Banks, Inc. (NYSE: STI) are the fullest valued, the note said. As such, Kotowski lowered the two banks' ratings from Outperform to Perform.

Conversely, Oppenheimer continues to like Bank of America Corp (NYSE: BAC), Citigroup Inc (NYSE: C), Capital One Financial Corp. (NYSE: COF) and Discover Financial Services (NYSE: DFS). Inside the regional banks, Oppenheimer said it sees "select opportunities," including with Citizens Financial Group Inc (NYSE: CFG) and Fifth Third Bancorp (NASDAQ: FITB).

Relative to the market, Oppenheimer said that the banking sector's valuation was at ~72 percent, near its historical average of 73 percent.

"The group is not expensive," the note dictated. Kotowski recommended that investors stay "relatively full weighted," but argued that the valuation includes the prospect of higher rates in 2016.

Year-to-date, JP Morgan has performed the best of the listed stocks, gaining 14.4 percent. SunTrust and Citizens Financial have each added 8.7 percent. Moving from there, Capital One gained 6.7 percent, Fifth Third is up 2.5 percent and Citigroup added 1.7 percent. Bank of America lost more than 5 percent, while Discover shrunk nearly 12 percent.