(Bloomberg) — Bank stocks have been one of the best trades of 2021, and with third-quarter earnings set to kick off on Wednesday analysts expect the industry to show continued strength. The question for the shares, however, is how hot is too hot?

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The KBW Bank Index has surged almost 40% in 2021, more than doubling the broader S&P 500 Index’s 17% gain, as investors keep buying lenders amid growing expectations that a U.S. economic recovery will spur the Federal Reserve to scale back is massive asset purchase program and eventually begin raising interest rates.

“It’s hard to be too negative on the banks given a generally favorable macroeconomic outlook among most and the prospect for higher rates and faster loan growth,” Deutsche Bank analyst Matt O’Connor wrote in a Sept. 30 note to clients.

This anticipation reached a fever pitch following the FOMC’s Sept. 22 policy decision, when Chair Jerome Powell said the central bank may start its long-awaited tapering soon, while the latest dot plot showed nine of 18 Fed officials expect at least one rate hike by the end of next year. All 24 members of the KBW Bank Index have climbed at least 4.6% since then, with three-quarters of them rising 10% or more.

Despite the strong performance by banks through the first nine months of the year, many analysts aren’t wavering in their bullish outlooks, believing that the environment is right for these stocks to keep running. In September, Keefe Bruyette & Woods analysts including Christopher McGratty upgraded the entire U.S. banking sector to overweight, saying an inflection in loan growth, higher interest rates and the redeployment of cash should bolster earnings.

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That sentiment was echoed by RBC Capital Markets analyst Gerard Cassidy, who said bank shares should continue to push higher over the next year — barring a double-dip recession. “Investors who believe that the economy will continue to expand, especially as supply chain disruptions are resolved and inventories are rebuilt, should look to own banks stocks,” he said.

That isn’t to say everyone agrees. Indeed, the current debate on Wall Street is whether banks are priced too close to perfection.

“Big U.S. banks are trading rich,” BMO Capital Markets analyst James Fotheringham said. He suggests investors look to take profits as JPMorgan Chase & Co. — which kicks off the earnings party Wednesday morning — and Bank of America Corp. have soared above historical averages.

Morgan Stanley shares have also come under fire recently after surging nearly 54% this year through late August, when they touched a record high. The bank was hit with downgrades on back-to-back days late last month, with analysts at Oppenheimer and Berenberg both citing valuation concerns as the reasoning behind their cuts.

This isn’t the case in Europe, where banks are this year’s top-performing sector this year, yet the shares remain historically cheap. Trading at nine times forward earnings, banks are the third-cheapest sector in the Stoxx 600 Index and trade at a roughly 40% discount to the broad benchmark.

And to be sure, not everyone is worried about U.S. banks’ elevated multiples. Baird’s David George and Goldman Sachs analysts led by Richard Ramsden agree that while valuations are elevated compared to historical norms, they still look attractive when compared to the broader market.

While next week’s results should help start to settle the debate around valuations, investors may already be turning their attention elsewhere. “The Q3 numbers themselves should be relatively boring and bland,” said Vital Knowledge founder Adam Crisafulli. “The bulk of the near-term price action will be based on Treasuries and macro forces along with capital returns and Fed staffing.”

Here’s a look at where the big six U.S. bank stocks stand as they head into third-quarter earnings next week:

JPMorgan Chase & Co.

The bank will kick off the reporting season on Wednesday morning with its shares having surged 34% this year, including 11% since the Fed’s Sept. 22 policy meeting. The run-up has narrowed the gap with analysts’ 12-month target price to less than 1%. It has 19 buy ratings, but its three sell ratings are the most among the six biggest banks.

Bank of America Corp.

BofA is expected to be the first in a flurry of releases Thursday morning. The shares have climbed 46% in 2021, outpacing analyst price targets and leaving it with an implied return of -1.2% over the next 12 months. Wolfe Research analyst recently downgraded the stock to peerperform from outperform, citing concerns about its valuation.

Wells Fargo & Co.

Wells Fargo reports Thursday, and while its shares remain well below pre-pandemic levels their 59% return in 2021 makes Wells the best performing big bank this year. Nearly half the analysts who cover it have the equivalent of a hold rating, though their average 12-month price target is 5.9% above its Friday closing level.

Morgan Stanley

Shares are up 46% this year and are just shy of their August record high ahead of its Thursday release. Oppenheimer and Berenberg cut their ratings on the stock to hold-equivalents. Still, its 21 buy ratings are the most among the big six banks.

Citigroup Inc.

Citi will cap off Thursday’s bank earnings deluge. The stock is up 17% in 2021, by far the worst for the group. Still, analysts have maintained their price targets and see 14% in return potential over the next 12 months. The lender is tied for the second-most buy-equivalent ratings in the group and is one of only two of the big six banks to not have any sell ratings.

Goldman Sachs Group Inc.

Goldman releases its earnings Friday morning. The stock has climbed 49% so far this year, making it the group’s second-best performer. Analysts have steadily raised their price targets amid the rally and see an additional 8.1% in upside over the next year, trailing only Citi’s return potential.

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