Traders work on the floor of the New York Stock Exchange
Traders on the floor of the New York Stock Exchange REUTERS

The massive rally shares of the largest banks in the U.S. have seen over the past seven weeks is likely over, a banking analyst for Swiss bank UBS said in various notes to clients today, and investors would be wise to take profits now while the market valuation of those companies remains high.

In three separate reports, Brennan Hawken, an analyst for UBS, downgraded his view on shares of Citigroup Inc. (NYSE:C), Morgan Stanley (NYSE:MS) and Goldman Sachs Group Inc. (NYSE:GS), noting stock in those three companies had risen in value close to or over 30 percent since late July.

"We are generally more cautious on the group overall, given the run up in the sector," Hawken wrote, comparing the rally in large banks to increases of 13 percent for the benchmark Financial Select Sector SPDR exchange-traded fund (NYSEARCA: XLF) and the 8 percent spike in the S&P 500 Index over the same period.

With the move, UBS keeps a "Buy" recommendation only on JPMorgan Chase & Co. (NYSE:JPM), among large U.S. banks. The bank has "Hold" ratings on Wells Fargo & Co. (NYSE: WFC) and Bank of America (NYSE:BAC)

In his notes, Hawken reiterated the change in rating was due to recent valuation changes, and not fundamentals. He appeared particularly pained in downgrading Citigroup, noting UBS believed that "Citi is likely a great stock over a longer time horizon, and ... unlocking capital trapped in Citi Holdings and the DTA could result in strong shareholder returns."

"However, in the near-term, we believe the market tends to ignore the positive steps Citi management has made over the past several years, particularly in times of stress," Hawken wrote.

The warning from UBS comes as large bank stocks have underperformed the wider market in the five trading days since the U.S. Federal Reserve announced a new round of monetary stimulus. On the day of the announcement, large banks jumped between 2.75 percent and 4.79 percent, as the wider market closed the day up 1.6 percent. Since then, bank stocks have lost ground as the wider market has traded flat.