So far this earnings season, perhaps no group of stocks has stood out as much as America’s financials.
Credit problems continue to fade into the rear-view mirror, and some of the huge stockpiles of cash set aside for potential losses is finding its way back into the income statement. Meanwhile, housing is in the early stages of a recovery, and while loan demand is not as strong as it was few years ago, it’s improving.
The outlook for the regional bank stocks in specific is very strong going into the second half of the year, as the backup in long-term rates should allow them to report higher net interest margins for the rest of 2013.
Most of the regional banks we follow in Portfolio Grader are starting to get upgraded as the earnings and fundamental outlook improve. Some bank stocks have already made it to our top ranking, so investors looking to ride the industry’s positive trends should consider purchasing these stocks immediately:
Old Second Bancorp (OSBC) was upgraded to an “A” back in April after reporting a blowout first quarter. Earnings per share are up more than 50% so far this year, and I expect another positive quarter when OSBC reports earnings later this month. Credit conditions in the Chicago-area bank’s portfolio have improved dramatically, and Old Second should continue to see favorable developments for the rest of the year. Consider this bank stock a “strong buy” right now.
Banner Corp. (BANR) has posted four consecutive earnings surprise, and analysts have been raising their estimates for the second half of the year. The Walla Walla, Wash.-based bank holding company reported first-quarter EPS that soared by 50% year-over-year, and I expect BANR to beat analyst expectations again when it reports earnings July 24. Banner recently was named the best top community bank lender to small businesses by the Small Business Administration and has made acquisitions to continue to expand its franchise in the Seattle area. The bank was upgraded to an “A” back in May and remains a “strong buy.”
BNC Bancorp (BNCN) is the parent company of the Bank of North Carolina and has 35 branches in North and South Carolina. First-quarter earnings rocketed 150%, resulting in earnings per share that improved by more than 25% (thanks to an extra 155 million shares issued since then), and analysts are projecting huge increases for the rest of the year and 2014 as conditions in the region continue to strengthen. BNC stock has been rated “A” by Portfolio Grader all year and remains a “strong buy.”
Conditions in the banking industry are steadily improving. Investors should keep an eye on ratings changes in Portfolio Grader as bank stocks are on the verge of becoming one of the most exciting growth sectors in the marketplace.
Louis Navellier is the editor of Blue Chip Growth.