Bank of America Corp. (BAC), CIT Group Inc. (CIT), Citigroup Inc. (C) and Goldman Sachs Group Inc. (GS) are among financial stocks that are set to outperform the broader market as the segment recovers from a slight dip in 2018, according to one team of bulls on the Street. 

While the Financial Select Sector SPDR  ETF (XLF) is close to flat so far this year, as a surge in broader volatility has taken a bite out of gains secured over the past few months, the sector shouldn't be down for long, according to analysts at Oppenheimer, detailed by Barron's on March 27, . 

Financial companies were highlighted on the Street as some of the biggest beneficiaries of the GOP tax overhaul passed in late 2017. The tax reform, which cut the corporate tax rate from 35% to 21% and incentivized the repatriation of billions in overseas cash, freed up savings for America's most powerful corporations to carry out activity such as share buybacks, which have reached record highs on the new tax plan, and M&A. (See also: The Biggest Corporate Winners From Trump Tax Deal.)

Fundamentals Remain 'Very Stable and Solid'

Fundamentals in the finance space remain "very stable and solid," which should support double-digit core operating earnings-per-share (EPS) gains for bank stocks this year, not even taking into account the boost expected to come from lower corporate taxes, according to Oppenheimer analyst Chris Kotowski.

The analyst noted that banks are still up against the market by approximately 100 basis points in 2018, and should "quietly outperform" for the rest of the year, given a strong backdrop. He added that companies should see some expansion in their stock multiples.  The sector should also reap the benefits of low-single-digit-expense growth as they buy back shares in the 3% to 4% range, wrote Kotowski. 

Also this week, Keefe, Bruyette & Wood's Brian Kleinhanzl released a note forecasting a spike in M&A activity in the financial sector after a period wherein banks were selling off assets in order to comply with regulations that arose after the financial crisis. Kleinhanzl expects banks such as JPMorgan Chase & Co. (JPM) and Goldman Sachs to be the most active as they use the mounds of cash on their balance sheets to execute deals for "growth or to fill in functionality." (See also: Goldman Computer Model Warns Bear Market Is Near.)

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