12 Bank Stocks That Wall Street Loves the Most
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Bank earnings season kicked off Friday, April 12, with first-quarter reports from JPMorgan Chase (JPM) and Wells Fargo (WFC). As more reports roll in, investors will be keen to see what a pause in interest-rate hikes and a potential slowdown in economic growth could mean for the sector going forward.
After all, those and other concerns have made financial stocks a market laggard so far this year. The Standard & Poor's 500-stock index is up a hot 15% for the year through April 10. The financial sector, however, gained just 11% over the same span. The bank subsector was up a bit more than 12%.
But the financial sector might be ready to pivot. Analysts surveyed by Refinitiv expect the sector to post year-over-year Q1 earnings growth of just 2.9%. That doesn't sound like much, but it's encouraging when you consider that FactSet estimates the S&P 500's profits will contract by 4.2% for the quarter.
Which bank stocks are analysts most excited about right now? We screened the Russell 1000 Index for the top-rated small, midsize and large bank stocks. S&P Global Market Intelligence surveys analysts' ratings on stocks and scores them on a five-point scale, where 1.0 equals "Strong Buy" and 5.0 means "Strong Sell." Any score of 2.0 or lower means that analysts, on average, rate the stock a "Buy." The closer the score gets to 1.0, the better.
Here are the 12 best-rated bank stocks as earnings season gets into gear. This group is broken down into the four most-loved stock picks in the small-, mid- and large-cap spaces.
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Top-Rated Small Bank Stock #4: PopularCourtesy Coolcaesar at en.wikipedia, CC BY-SA 3.0
Market value: $5.1 billion
Dividend yield: 2.3%
Analysts' average recommendation: 1.44
Analysts believe Popular (BPOP, $53.05) is poised for steady-if-not-spectacular growth. The regional bank serving Puerto Rico, New York, New Jersey and Florida is expected to deliver average earnings growth of 5% a year for the next half-decade.
Add in the healthy dividend yield, and you have a stock that Wall Street equity researchers are firmly behind. Analysts at Sandler O'Neill & Partners - which specializes in financial-sector analysis - rate BPOP stock at "Buy." They say the bank's "capital position remains extremely robust" and that "BPOP is set up for a very nice 2019."
Popular's stock is up about 12% for the year-to-date, lagging the S&P 500 by 3 percentage points. The next potential catalyst is its Q1 earnings report, which is expected to come out ahead of the April 18 market open.
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Top-Rated Small Bank Stock #3: Sterling BancorpMarket value: $4.2 billion
Dividend yield: 1.4%
Analysts' average recommendation: 1.5
Regional financial stock Sterling Bancorp (STL, $19.88) is having a hot year. Shares are up more than 20% so far in 2019, and analysts think there's more outperformance to come.
With an average recommendation score of 1.5, the Street leans heavily toward "Strong Buy" and "Buy" calls. Sandler O'Neill analysts base their own "Buy" call partly on the stock's "compelling valuation." They also laud the company's ability to keep a cap on costs: "Expense control has been excellent."
The regional bank with locations primarily in the greater New York area is expected to deliver annual average earnings growth of 5% for the next five years. Sterling's next quarterly update should come after the April 24 market close.
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Top-Rated Small Bank Stock #2: Pinnacle Financial PartnersMarket value: $4.3 billion
Dividend yield: 1.2%
Analysts' average recommendation: 1.5
Shares in Pinnacle Financial Partners (PNFP, $55.86) are on a tear so far in 2019. PNFP is up more than 21% for the year-to-date, easily outpacing the broader market. Analysts believe the regional bank - which serves Tennessee, North Carolina, South Carolina and Virginia - is set to deliver outsize earnings growth.
Sandler O'Neill analysts, who rate the stock at "Buy," note that "new revenue producers will continue to fuel future growth."
The analyst consensus is for earnings to increase at an average annual pace of 32% for the next five years, according to Refinitiv data. No wonder Wall Street's pros are so bullish on this bank stock, which is set to report its quarterly results after the April 15 close.
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Top Rated Small Bank Stock #1: Western Alliance BancorporationMarket value: $4.5 billion
Dividend yield: N/A
Analysts' average recommendation: 1.29
Shares in Western Alliance Bancorporation (WAL, $43.32) - a regional bank with branches in California, Arizona and Nevada - tumbled in March after the Federal Reserve indicated that it wouldn't raise interest rates again in 2019. Low rates put pressure on banks' net interest margins, or the difference between what a lender pays for deposits and charges for loans. Thus, WAL was hardly alone in reacting negatively.
Analysts as a group remain bullish on Western Alliance's stock, however, which has rallied sharply in recent weeks. Indeed, WAL is up 11% since bottoming on March 22. Standard & Poor's 500-stock index has gained 3% over the same time frame.
The regional bank is forecast to generate average annual earnings growth of 7.5% over the next five years, according to data from Refinitiv. Its quarterly results are expected to come after the April 22 closing bell.
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Top-Rated Mid Bank Stock #4: Huntington BancsharesGetty Images
Market value: $14 billion
Dividend yield: 4.2%
Analysts' average recommendation: 2.39
Huntington Bancshares (HBAN, $13.30) - a regional bank based in Columbus, Ohio, with branches mainly concentrated in the Midwest - offers a generous dividend yield and high forecast dividend growth.
Concerns about stagnant interest rates and slower economic growth have some analysts leaning toward being more cautious on the stock. Their average recommendation of 2.39 sits between the "Buy" and "Hold" camps.
Analysts expect HBAN to generate average earnings growth of 8% a year for the next five years, according to a survey by Refinitiv. That should help fund a dividend that has doubled from 7 cents per share quarterly to 14 cents since late 2015.
Huntington's next earnings report is due out ahead of the April 25 market open.
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Top-Rated Mid Bank Stock #3: KeyCorpGetty Images
Market value: $16.4 billion
Dividend yield: 4.2%
Analysts' average recommendation: 2.0
With more than 1,100 branches across 15 states and about $130 billion in assets, Cleveland-based KeyCorp (KEY, $16.39) is one of the largest regional banks in the nation. A hefty dividend yield north of 4% and solid growth prospects have analysts convinced that solid returns still lie ahead.
Zacks Equity Research notes that KeyCorp has been driving growth through acquisitions. Since 2016, the bank has bought out First Niagara Financial Group, HelloWallet and Cain Brothers & Company. Most recently, it closed on its acquisition of Laurel Road Bank's digital lending business in early April.
Analysts forecast the bank to generate average annual earnings growth of 6.7% for the next five years. Add in the dividend yield of more than 4% and KEY gets an average analyst recommendation of "Buy."
KeyCorp is expected to report earnings on the morning of April 18.
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Top-Rated Mid Bank Stock #2: SVB Financial Group- 1