Are Bank Stocks The Way Forward In 2016?

Earlier in December, the U.S. Federal Reserve raised interest rates by a quarter of a percentage point, leading many traders to worry about the state of share markets come 2016.

However, with further rate hikes likely in the New Year, many believe financials and bank stocks are poised to profit. Here's a look at three banking stocks that could be primed for gains in 2016.

1. Bank of America Corp (NYSE: BAC)

Bank of America has been a comeback story over the past few years, as the company suffered near financial ruin after acquiring Countrywide at the beginning of the financial crisis.

The entire ordeal is estimated to have cost the bank more than $195 billion, but some analysts say that the worst is finally behind the issue. This year, a U.S. court ruled that those affected by faulty mortgage-backed securities must make their claims within six years of the purchase, meaning that 2016 should give the bank a fresh start.

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For that reason, Bank of America could be a big winner in 2016, as the company finally has a great deal of freed-up cash to spend on creating value rather than doing damage control.

2. HSBC Holdings plc (ADR) (NYSE: HSBC)

HSBC represents a riskier play for investors who want to buy in while the chips are down. The London-based bank has seen its shares fall 16.12 percent over the past year, making now a good buying opportunity.

The company pays an impressive 6.4 percent dividend yield and has been implementing cost cutting measures that some analysts say will free up even more cash to pass on to shareholders. While the bank's status operating around the globe opens it up to some risk, as many nations continue to struggle with financial uncertainty and interest rates decline, the bank could also benefit from a recovery in Europe.

3. PNC Financial Services Group Inc (NYSE: PNC)

PNC has proven itself resilient as one of the top regional banks in the United States. Unlike HSBC, the bank doesn't have any exposure to falling interest rates in Europe, and its strong presence in the United States means that the Fed's rate hike will directly benefit the firm.

The bank has already begun working to reap the rewards of the rate increase, saying that it expects to see its net interest income rise by 2 percent over the next year if rates rise by 1 percent. Should rates increase by another 1 percent in 2017, the bank says it will generate an additional 6.8 percent.