The first earnings season of 2021 will kick off with big banks reporting on Friday, as JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC) report earnings for the fourth quarter of 2020.

Analysts will be focused on guidance from the big banks, which will reveal the degree of optimism on Wall Street for the pace of recovery.

Surging virus cases and new shutdowns at the end of last year are likely to have weighed down on bank earnings in the fourth quarter, with KBW expecting an 8% year-over-year decline in earnings per share.

But with the vaccine rollout underway, banks are hoping that the first quarter of 2021 and beyond will prove to be a turning point.

“Relative stock performance will be less about the quarter and more about the outlook for credit recovery, [pre-tax, pre-provision] earnings, and capital management,” KBW bank analyst Brian Kleinhanzl wrote Jan. 8.

Bank stocks were battered by the coronavirus in 2020, as concerns over loan repayment pushed the largest firms to beef up their provisions for loan losses.

Although COVID-19 cases continue to break records nationwide, expectations for widespread vaccination have pushed bank stocks higher. Since the new year, shares of the four biggest banks (the three reporting on Friday plus Bank of America, which will report Tuesday) have all risen over 10%.

Deutsche Bank Research’s Matt O’Connor wrote Jan. 7 that the banks could see another 10% to 15% relative move higher if the recovery can prove that it can last through 2021 and beyond.

Gerard Cassidy, an analyst at RBC Capital Markets, told Yahoo Finance Wednesday that he also sees upside in bank stocks of about 20% to 25%.

“They still are not trading at levels that we would suggest would be fair value when you compare where they have traded historically over the last five years,” Cassidy said.

Boost from bond yields

The rally in bank stocks in January came alongside a bump higher in longer-term bond yields.

Since the new year, the yield on the 10-year U.S. Treasury rose as much as 27 basis points, to 1.18%. The 30-year U.S. Treasury yield similarly rose as much as 27 basis points, to 1.91%.

With short-term interest rates still pinned to near-zero by the Federal Reserve, banks that borrow short and lend long hope that higher longer-term rates will improve margins in 2021.

Net interest margins, a key measure of interest collected on loans minus interest paid on deposits, fell considerably over the course of 2020.

“The pressure on net interest margins could be alleviated should that yield continue to rise as the economy recovers in 2021,” Cassidy said.