Although Russia’s invasion of Ukraine may lead to lower economic growth in the short-term, with the market expecting the UK base rate to rise to 2.0% by year-end, banks are at long last set to benefit from economic tailwinds. This, coupled with the potential for further COVID-19 provision releases, should lead to earnings beating estimates, which remain conservative. We continue to prefer the specialist lenders, as they have carved out niches and are becoming leaders in their respective markets, such as BTL mortgages and SME lending. They also offer higher growth and returns at attractive valuations of FY22E PE and P/TBV of 7.6x and 1.2x for RoTE of 16.7%, compared to large UK banks on 9.0x and 0.8x for RoTE of 8.4%. Among the challenger banks we prefer Virgin Money UK, as we estimate it to benefit the most from interest rate rises and believe there remains scepticism regarding its digital investment and returns potential. Metro Bank has improved its product mix and margins but we continue to believe its model remains challenged, with no profits in sight. We upgrade CBG to a BUY (from HOLD), as we believe the recent share price fall is overdone and increase our TP for OSB to 790p (from 645p) and Paragon to 650p (from 630p) while maintaining BUY.