Getty ImagesIt’s the perfect storm for banks, says Coutt’s Alan HigginsBanks are back in favor with fund managers because the sector offers some of the cheapest valuations as well as a strong growth outlook, according to two top investment executives. “It’s the perfect storm for banks. You’re seeing credit growth emerge, even in Europe. You’re seeing stronger economic growth, so it means less bad loans. And of course banks are reasonably valued or downright cheap,” Alan Higgins, chief investment officer at Coutts, said on the sidelines of the Fund Forum international conference in Monaco. “We own financials in Japan, in the U.S. and in Europe. We love banks,” he added and said he doesn’t think it’s too late to buy. Coutts, famous in the U.K. for being the Queen’s bank, currently owns shares of Lloyds Banking Group PLC LLOY, -0.80% LYG, -0.92% and has bought exposure to the wider European banking sector through the Lyxor ETF STOXX Europe 600 Banks BNK, -0.79% he said. In the U.S., it favors J.P. Morgan Chase & Co.JPM, -0.81% and Morgan Stanley MS, -0.91% and it owns owning Mitsubishi8306, +1.21% and Sumitomo 8316, +2.27% in Japan. U.S. banking shares have moved sideways so far in 2015, and the S&P 500 Financials index is down 1.3%. In Europe, the Lyxor banking ETF has rallied 18% this year, while the Stoxx Europe 600 Banks Index FX7, -0.86% has jumped 15%. But even with the solid outperformance in Europe’s banking sector, there are more gains to be had from the region’s financial stocks, said Lucy MacDonald, chief investment officer for global equities at Allianz Global Investors. “Our biggest challenge over the last year has been finding some absolute upside after a very strong market,” she said. “Within the U.S. context, the financial sector still offers some upside, but I think there’s more upside in the European financial sector in the medium term, because the U.S. is in a later stage of recovery. They restructured the banking system very early and in Europe it’s just beginning to happen,” she added. MacDonald pointed to UBS AG UBSN, -1.94% UBS, +1.58% as one of her favorite holdings, noting that she would probably buy more if there is a Greece-related selloff. The Italian banking sector has piqued her interest because of the potential for consolidation there, she said. And Allianz isn't ignoring the U.S. finance industry. The company invests in Citigroup Inc. C, -0.56% because of its restructuring process and decline in bad debts, and is warming up to American Express Co. AXP, -0.24% MacDonald said. “[American Express] valuations are quite depressed at the moment for two reasons. One is that the dollar is being quite strong and a lot of their business is overseas,” she said. “Second, they did lose Costco and that was a surprise for markets, so markets sold them off quite severely. We don’t think that was justified.” MarketWatch