There is not much opportunity in bank stocks until the markets see signs the U.S. 10-year Treasury will rise, FBR Capital Markets' Paul Miller said Friday.
Miller made his comments after JPMorgan Chase's earnings topped Wall Street's estimates on Thursday and Citigroup followed suit on Friday. Wells Fargo matched profit expectations Friday, though revenue came in shy of estimates.
Still, Miller said all eyes are still on the U.S. 10-year yield, which remains near multiyear lows.
"As that 10-year comes up — if it does come up — then you're going to sit there and say, 'I'm going to be buying these things all day long,'" FBR's head of financial institutions research told CNBC's "Squawk on the Street."
FBR likes mortgage players such as Wells Fargo, U.S. Bancorp and PNC Financial Services Group on the view that another home refinancing boom is on the horizon.
To be sure, with banks' net interest margins under pressure in the current low interest rate environment, such a refinancing boom will only provide temporary support, he said. A solid upswing in home refinancing would yield a six to nine-month earning support for a bank leveraged to housing like Wells Fargo, he added.
"The bottom line is it's all about the yield curve and rates. If rates continue to stay here, the refi boom will burn itself out, and you'll be sitting with these things probably where they're trading today," Miller said.
Gerard Cassidy, RBC equity research analyst, said higher rates are critical to boosting banks' net interest margin, or the difference between interest income banks generate and the interest they pay out to their lenders.
"If there's no action on the short end of the curve, and the yield curve continues to flatten these banks are going to still have that headwind to combat," he said.
The yield curve flattens when short- and long-term bond yields converge.
If the rate environment doesn't improve, Cassidy said he expects big mergers among regional banks in the next 18 months as these institutions seek to achieve higher earnings through cost savings.
"Any bank that's not earning their cost of capital, which we argue is around 9 to 10 percent, if the [return on equity] is in 6, 7, 8 percent range, you have to wonder if they're vulnerable," he told "Squawk on the Street" on Friday.
He noted that Comerica is under assault from activist investors. Citizens Financial Group and Regions Financial also need to improve their return on equity in his view.