Are the Money Center Banks a Buy?

February 23, 2026 | The equity of many banks traded off in January following Q4 2025 earnings. The earnings were not bad by any means, but some investors seemingly decided to take profits after a remarkable run in banks stocks going back to last October.  Citigroup (C) remains the best performer of the top five depositories, but there seems to be more risk than reward in large banks presently.

The prospect of additional interest rate cuts were the main catalyst for the secular move higher in financials in Q4, but as we like to remind readers, relative spreads are the driver for bank profits, not interest rates. Well-managed banks should make money regardless of interest rates, but a flat yield curve with relatively small differences in rates between the long and short tenors can hurt profits. Banks fund off short-term rates and lend or invest off the longer term.

Twos to Tens

Back in 2023, the key Treasury market benchmark of the 10-year note minus the 2-year note was negative, shown in the chart above from Fred. This reflected the tight policy of the Federal Open Market Committee. Whereas 2s to 10s were 1.5% back in 2021 during the last part of quantitative easing, today the spread is just over half a point, reflecting a less attractive interest rates environment for banks, REITs and other financial institutions that profit from leverage. 

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