Yes, says Warren Buffett in the US, though over here analysts are more wary.
Banks are in great shape or at least American ones are according to the investment guru Warren Buffett. The Sage of Omaha has decreed that US banks no longer pose a threat to the economy.
"The banks will not get this country in trouble, I guarantee it," Mr Buffett said last week. "The capital ratios are huge, the excesses on the asset side have been largely cleared out. Our banking system is in the best shape in recent memory."
US banks are still cheap compared to historical values, so is Mr Buffett advocating a buying opportunity for investors? He could be accused of talking up his own stock he has a stake in four of America's largest financial companies including Bank of America (Other OTC: BACYL - news) , Goldman Sachs (NYSE: GS-PB - news) and US Bancorp.
Mr Buffett has been bullish on banks for some time but he is not the only one. Over on this side of the pond, one of the UK's most successful hedge fund managers, Crispin Odey, made a fortune betting against the banks during the financial crisis but backed financial stocks in 2011. He called the banking story too early, losing investors 20.3pc, but in 2012 when Barclays share price bounced 31pc, he reaped the rewards.
Mr Odey said the rally is over, for UK banks at least.
"Bank stocks have gone up a long way since I bought," he said. "In 2011 there were policy mistakes and bad management, but that came to an end last July. Borrowing costs for banks fell dramatically last year and that helped push the share price up. For banks to rise further they have to be lending but they're not in the UK. The US is a different story."
Mr Odey said that banks thrived in a capitalist society, and America was much closer to functioning like a capitalist economy than the UK. He did concede that banking bonds were paying attractive yields, but he said fixed interest in general was overpriced.
For those who want bond exposure, financials are not a bad place to be, with some niche investment banks paying up to 6.5pc income.
Peter Harvey, head of credit at Cazenove, said the long-term path towards banks with lower leverage, more capital and better regulation was favourable to bond investors.
"The process of de-risking banks will take many years, possibly decades, but the direction is clear," he said. "We believe bank bonds will benefit directly and insurance bonds will benefit indirectly. We hold the subordinated securities of Lloyds Banking (Other OTC: LLDTF - news) , Santander UK, L&G (LSE: LGEN.L - news) , Aviva (LSE: AV.L - news) and RLMI."
While exponential equity returns might be a thing of the past for the UK banking sector, not everyone thinks the rally is over. Mr Odey is famed for taking punchy bets and having high volatility but more risk-averse portfolio managers still see value in the high street.
Alan Higgins, chief investment officer at Coutts, said: "Until lately, we have been playing the financial sector via fixed interest. We have been big holders of subordinated bonds bonds issued by banks to raise finance. For example, we made some decent returns in the so-called Lloyds CoCos bonds that the bank issued when it looked to increase its capital ratios in the aftermath of the financial crisis.
"But we're now considering tweaking our strategy by increasing our exposure to cyclical and financial stocks as the outlook for the broader economy, buoyed by the US partially resolving the fiscal cliff, improves. And with many bank bonds now paying much lower yields it may make sense to rotate financial bonds into financial equity. It is a move that I and my colleagues are investigating at this very moment."
Tommy Bryson, co-manager of the Alliance Trust European Equity fund, said investors looking for growth should consider European financials. "Over the last three years we have held quite a bearish outlook on markets and have held a higher proportion of stocks in defensive sectors such as health care and food staples," he said.
"We believe there is significant value in European financials, particularly the larger Spanish banks such as BBVA (Madrid: BBVA.MC - news) and Santander (Madrid: SAN.MC - news) , which we expect to emerge from the crisis as the long-term winners given the potent combination of balance sheet strength, diversity of geographic operations and reducing competition."