Two heavyweights Bank shares are caught up in a heavyweight boxing bout. In the blue corner: Cyclical Fear with a menacing ''never buy banks into a recession'' robe. In the red: Structural Shift, wearing ''Rates matter most'' shorts. This report adds fresh work on the merits and weaknesses of each fighter. A knock-out will not come soon, but Shift will win out, we expect, and looks undervalued. Cyclical fear overdone - new work Investors are focused on recession risks. We dust off two analyses which were anti-consensual and ultimately correct in 2020. The most provocative work here looks at the relationship between credit spreads, bad debts and equity market valuation. It argues that impairments will remain benign. If you disagree, it suggests you sell broader equity and credit exposure, not bank equity. Structural opportunity underappreciated - new work Q1 was the sector''s best quarter for NII surprise in years. We use real-time data to show how much better March was than January, and the sizeable improvement since. Right about now, banks are writing new business at wider spreads than what''s on their balance-sheet for the first time in fifteen years. Consensus still looks well behind ''the curve''. Lessons from Q1 We look at the lessons from Q1, and the valuations, catalysts, and stock selection considerations for the rest of the year. ''NII up, costs up, EPS up'' could well be the chorus of 2022. That''s fine - in a market fearing the P/E of defensives and the EPS of cyclicals, for banks we fear neither. Investment conclusions Opportunistically, we upgrade SEB (to ''+'' from ''='') and downgrade Swedbank (to ''='' from ''+''). Our Top Pick list expects defensive rate-sensitives to continue to outperform: HSBC, Lloyds, CaixaBank, Bank of Ireland and UBS. Over-sold beta - Unicredit, SocGen, Erste - is agitating to get onto the list. We hold off for now: history suggests not to be too bold until PMIs trough.