7 Bank Stocks to Watch as Q1 Earnings Kick Off

bank stocks - 7 Bank Stocks to Watch as Q1 Earnings Kick Off

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Based on the KBW Nasdaq Bank Index (INDEXNASDAQ:BKX), the banking sector in general is up nearly 25% in 2021. This is a continuation of a trend that began in late 2020 when the market began to bid up bank stocks in anticipation of the Covid-19 vaccine rollout.

April marks the beginning of earnings season, which will put many bank stocks in focus. And while it’s widely expected that banks will report good earnings, there are other tailwinds fanning the banking sector.

First, the vaccination rollout continues even with the presence of Covid-19 variants. In fact, there is some thought that the United States may reach its desired immunization threshold in as soon as three months. When that occurs, the potential economic stimulus that may be spurred by increased travel and live events is another reason for optimism about bank stocks.

Next, there’s the yield curve. The rates on the long-term end of the yield curve continue to increase. The yield on the 10-year Treasury note is up nearly 80% in 2021 and sits at around 1.68% as of this writing.

Yet another catalyst for bank stocks lies in the upcoming stress tests. The Federal Reserve has told banks that it will remove the restrictions on dividends and share buybacks if they pass this year’s stress test. Although this will not be implemented until Q3 at the earliest, investors will be looking for guidance from the banks when they report earnings.

With many reasons for optimism, here are seven bank stocks that look to have more room on the upside.

  • JPMorgan Chase (NYSE:JPM)
  • Wells Fargo Corporation (NYSE:WFC)
  • Citigroup (NYSE:C)
  • Ally Bank (NYSE:ALLY)
  • Signature Bank (NASDAQ:SBNY)
  • PNC Bank (NYSE:PNC)
  • Truist Financial (NYSE:TFC)

Bank Stocks: JPMorgan Chase (JPM)

JPMorgan Chase (JPM) lettering on a corporate office in New York City.
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A commonly used metric to use when choosing bank stocks is a favorable price-to-book ratio. And of all the stocks on this list, JPMorgan Chase has one of the higher ones at 1.9%. However, that shouldn’t change your opinion of JPM stock.

The stock is up 23% for the year and 52% over the last 12 months. Furthermore, the bank had an exceptional fourth quarter, punctuated by the announcement that the provision for loan losses led to a net benefit of $1.9 billion. This coincided with $30.2 billion in net revenue.

JPMorgan CEO Jamie Dimon recently spoke about the threat that fintech posed to traditional banks. Dimon has been an outspoken critic of excessive regulation. However, it’s hard to tell if Dimon is lobbying for less regulation on traditional banks or for the government to take a more active hand in regulating fintech companies.

Analysts give JPM stock a buy rating, with a consensus price target suggesting about 3% upside.

Wells Fargo (WFC)

Wells Fargo (WFC) bank sign in yellow and red with wagon logo. The sign is flanked by tall grass
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The most maligned of the big four banks, Wells Fargo is beginning to make a comeback and it would be wise for investors to take notice. Maybe they already are. In the last 12 months, WFC stock is up 23% and 35% in 2021.

Of course, Wells Fargo earned its spot in the penalty box with the fake-account scandal that led to the departure of several top executives. However, as a penalty the Federal Reserve placed restrictions on the bank’s size, which made the stock a poor investment prior to the pandemic.

But it appears that the Fed is signaling that it may be prepared to lift the bank’s asset cap. That won’t happen right away. However, any bit of good news that the bank can use to market itself may be able to stem the tide of losing customers. And with favorable conditions existing, Wells Fargo may have more upside than some of its competitors.

Citigroup (C)

A Citibank (C) sign hangs on a Citibank office in Hong Kong.
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Citigroup is one of the most closely watched bank stocks heading into earnings. The reason is the company’s recently appointed CEO, Jane Fraser. The buzz seems to be that investors are confident that Fraser has a solid plan for the bank. And that is creating optimism for C stock.

Not that investors need that much more confidence. The stock is already up nearly 53% in the last 12 months, easily outpacing the S&P 500. And the stock is up about 17% in 2021. For investors looking for any more momentum, the whisper number suggests that Citigroup will beat on earnings estimates. Even if the bank matches expectations, it will post earnings that are 88% higher on a year-over-year basis.

What many investors want to hear from Fraser is simplicity. Basically, Citigroup has a reputation of being too big and too complex. And Fraser takes over at a time when analysts want to see more leadership.

Ally Financial (ALLY)

bank customer sliding money to teller at bank desk
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Moving away from the big bank stocks, the next bank that I direct your attention to is Ally Financial. ALLY stock has been a pandemic winner, charging up 186% in the last 12 months. Ally is an online-only bank, which helped it fit right in during the pandemic.

The bank also specializes in financing auto loans. It has 7.7% of all auto loans in the United States, which accounts for over $100 billion in loans to over four million customers. And the company is not resting on that success. It’s already gathering momentum in the home mortgage market. The bank is also showing surprising strength in investment accounts and personal loans.

This growth will take time particularly because the company doesn’t have the same business relationships in other sectors like it does with auto loans. Nevertheless, if the company beats earnings estimates (as it’s expected to) you can imagine that the stock will have further upside as the economy continues to reopen.

Signature Bank (SBNY)

Finger pointing at the word "banking"
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The next of the bank stocks on this list is Signature Bank, a New York-based commercial bank. The bank offers a wide range of business and personal banking products and services.

In addition to all of the catalysts that surround the banking sector heading into earnings, Signature Bank is likely to benefit from two additional factors. First, it has exposure to digital currencies, which continues to show how institutions are becoming more accepting of cryptocurrencies. Second, Signature Bank does accept real-time payments.

SBNY is reviewed by 17 analysts and has a consensus rating of buy. Although the consensus price target suggests the stock should drift lower, recent price targets are significantly higher. For example, in late March Morgan Stanley (NYSE:MS) raised its price target for the bank to $280. And that was from a price target of $260, which was already nearly 13% above the current SBNY stock price. And if the company beats estimates, investors can expect further upgrades for the stock.

PNC Bank (PNC)

PNC bank logo on building
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PNC stock is up 71% in the last 12 months, which is flying in the face of some sour expectations. Although analysts are not as high on PNC compared to other bank stocks, a recent announcement suggests that the company may benefit from doing good.

In the case of PNC, the bank is trying to reach out to the unbanked or underbanked with the creation of a low-fee bank account that has received certification from the Cities for Financial Empowerment (CFE) Fund. The account will only charge customers $5 per month and have no charges for overdrafts or insufficient funds.

“We are committed to providing inclusive banking services for customers who may not have access to traditional checking or savings accounts,” said Bonnie Wikert, PNC executive vice president and head of retail segments and deposit products. “Our Smart Access prepaid debit card product is designed to help those customers conduct their banking in a safe and convenient manner.”

Truist Financial (TFC)

bank stocks Hand inserting ATM card into bank machine to withdraw money
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The last of the bank stocks on this list is Truist Financial, a super-regional bank that was formed by the merger of BB&T and SunTrust. TFC stock is up 66% in the last 12 months. Like other stocks on this list, TFC stock has a consensus buy rating with a price target that suggests some downside. On the other hand, recent price targets are significantly above the current price.

The stock has strong institutional ownership at over 70%. This says that hedge funds are taking an increased interest in the stock. The company is also expected to beat analysts’ expectations for its upcoming earnings report. That would continue the company’s recent habit of beating expectations. In fact, the company beat expectations on both the top and bottom lines throughout the pandemic. That’s no small feat.

And even if the stock doesn’t have quite the same growth trajectory, the stock still pays out a nice dividend that currently yields about 3%.

On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.


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