Bank stocks were a hot commodity when Donald Trump became America’s 45th president because many believed that looser regulations and higher interest rates would help bolster a sector that has been struggling since the financial crisis. However, when the excitement surrounding the presidential elections died down, bank stocks took a bit of a hammering, especially with earnings season upon us.
Some analysts have warned that bank stocks may fall even further as they release their earnings data in the coming days because lofty expectations coupled with high valuations could make for disappointing results. However, with that in mind, investors might want to consider which bank stocks to buy while prices are in a more reasonable range.
There are quite a few choices when it comes to bank stocks, but Bank of America Corp (NYSE:BAC), Wells Fargo & Co (NYSE:WFC) and Zions Bancorp (NASDAQ:ZION) are three good bets that offer solid operations and a rosy future outlook.
Bank Stocks With Gains Still to Come: Bank of America (BAC)
BAC stock has made its way 10% lower over the past month as the sector as a whole came down from its Trump rally following the president’s failed healthcare reform.
Trump’s failure to deliver on his promises to repeal and replace Obamacare could be a sign that his other vows — including lower corporate taxes and looser regulations — may not come to fruition. That has driven bank stocks down, but the nice thing about BAC is that the stock has a lot of upside no matter what Trump does in Washington.
BAC is a solid buy because of the company’s sound financials and its recovery after the financial crisis. The firm has turned in impressive results in past quarters with a 47% increase in profits during the fourth quarter of 2016. So while BAC stock would benefit from an interest rate increase and Trump’s deregulation plans, the bank has a bright future even without the president’s influence.
BAC has been upping its technology game over the past year and the company is rumored to be on its way to incorporating Apple Inc.’s (NASDAQ:AAPL) Apple Pay and near field communication at its ATMs. Those kinds of upgrades would cut down on fraudulent withdrawal activity and protect the bank against those costs.
Bank Stocks With Gains Still to Come: Wells Fargo (WFC)
The only investment in the financial sector that’s even less risky than BAC is Wells Fargo. The bank is a conservative investor’s dream because of the bank’s careful operations and ultra-low efficiency ratio. Not only does the bank offer an enticing 2.8% dividend yield, but the firm’s ROE is an impressive 11.2%.
WFC has suffered from its fake-account scandal, and many people are worried that the bank’s reputation can’t recover and that the fallout from the ordeal is far from over. However, those doubts are already weighing on the company’s share price and creating a great buying opportunity. Wells Fargo is likely to overcome this obstacle, and the scandal will soon be forgotten.
WFC is poised to thrive as the economy improves, but its tightly run operations also offer a security net should things take a turn for the worst.
Bank Stocks With Gains Still to Come: Zions Bancorp (ZION)
ZION stock has fallen roughly 9% over the past month alongside its large-cap peers, making now a great buying opportunity.
The bank’s shares have been under pressure amid worries that the Trump administration won’t be able to deliver on its campaign promises. However, it’s important to remember that Obamacare was a hot-button issue that was unlikely to change overnight, and some of Trump’s other promises — looser regulations, the repeal or amending of Dodd-Frank and lower corporate taxes — are much more likely to make their way through the Republican-controlled Congress.
If you believe that even one of those promises will become a reality during the Trump presidency, ZION is a good bet. The firm’s status as a mid-cap bank means it would benefit the most from changes made to Dodd-Frank regulations. Not only does the bank have relatively high compliance costs under the current rule, but revised Dodd-Frank regulations would also allow the bank to generate more revenue by allowing it to trade more freely and issue more loans.
As of this writing, Laura Hoy did not hold a position in any of the aforementioned securities.