- JPMorgan Chase (JPM): Simply put, JPMorgan Chase is too big to fail.
- Bank of America (BAC): Following a long-term turnaround, BofA looks forward to a second act.
- U.S. Bancorp (USB): Pivoting into cryptocurrencies could be useful for USB stock.
- Truist Financial (TFC): Exposure to lucrative North Carolina market bodes well for TFC.
- Prosperity Bancshares (PB): Operations in highly popular Texas could make PB a discounted buy.
- First Republic Bank (FRC): Heavy presence in economic powerhouse California could make FRC enticing.
- Patriot National Bancorp (PNBK): By serving a wealthy clientele, PNBK could be insulated from potential economic volatility.
In recent years, I’ve adopted a cautionary take on the broader economy – especially in light of rampant speculation – but I nevertheless concede that in cases like this, there are two sides of the story. If you happen to be on the optimistic end of the opinion spectrum, then considering bank stocks to buy could turn out to be a viable strategy.
Primarily, despite the Federal Reserve signaling a hawkish shift in monetary policy to remedy the understandable dovishness following the impact of the coronavirus pandemic, the market has performed relatively well. This suggests that Wall Street has already priced in a higher borrowing-cost environment, which in turn may lift bank stocks due to greater profitability potential.
As well, history suggests that adopting a tighter monetary strategy doesn’t necessarily have to spell doom. If attacking the expansion of the money supply necessarily led to poor results, the U.S. government would never have been able to address the inflationary pressures of the 1970s and early 1980s. That positive precedent exists for changing directions at the top bodes well for bank stocks.
Plus, you can make the argument that the publicly elected officials will be more willing to support major financial institutions during times of hardship since they represent the lifeblood of our modern economy. Therefore, if you’re confident in the recovery narrative, these bank stocks may belong in your portfolio.
|BAC||Bank of America||$39.39|
|FRC||First Republic Bank||$156.91|
|PNBK||Patriot National Bancorp||$16.84|
Bank Stocks to Buy: JPMorgan Chase (JPM)
Since the near implosion of the entire global financial system, big bank stocks like JPMorgan Chase (NYSE:JPM) don’t command much sympathy from onlookers. From the archives, Huffpost.com reported that JPM’s reputation fell to its lowest level on record in May 2012, following a $2 billion trading loss.
In January 2020, CNBC reported that JPMorgan was forced to admit to certain shortcomings. Apparently, some folks in the U.S. abuse their power and they also dislike others without justification. The controversy caused a stir for JPM and big bank stocks through guilt by association.
While few if any will come to the defense of the world’s biggest bank stocks, the reality is that no matter how many scandals a firm like JPMorgan gets embroiled in, it’s simply too big to fail. As the New York Times mentioned, JPM posted a record $48.3 billion in profit last year. This is a magnitude of fiscal power that no one can ignore.
Bank of America (BAC)
Back in 2019, Bank of America (NYSE:BAC) suffered a “dismal” customer service ranking, per Reader’s Digest. It’s not entirely surprising that BofA has struggled to win back the public’s trust. Taking a trip down memory lane, the Department of Justice in a landmark ruling ordered the company to pay $16.65 billion for the settlement of financial fraud leading up to and during the financial crisis.
I mention this because I recognize that many folks are still upset with the big bank stocks. Therefore, I’m not sympathizing with these institutional giants’ business practices. I’m just reporting the facts.
But there’s another fact that should be mentioned and that’s the turnaround effort under BofA CEO Brian T. Moynihan. As the New York Times detailed, Moynihan didn’t shy away from the criticisms that people readily leveled against big bank stocks. Still, under his leadership, the company recorded a profit of just under $32 billion – a corporate record.
With no plans to retire, Moynihan is seeking a second act for BAC stock. If you believe in the underlying conditions, you might want to give BofA a closer look.
U.S. Bancorp (USB)
On a year-to-date basis through the close of the April 6 session, U.S. Bancorp (NYSE:USB) finds itself down 7.5%. Over the trailing year, USB has been rather disappointing, losing nearly 7% of market value. However, for those with an adventurous attitude toward bank stocks, USB could be an interesting idea.
In October of last year, U.S. Bancorp announced the launch of its cryptocurrency custody services for its institutional investment managers. This news item should have long-term implications for USB in that such custody services will likely enhance the mainstream integration of crypto-related investments.
Though decentralization is wonderful, one of the drawbacks of purely decentralized platforms is the introduction of unprecedented administrative dilemmas, such as lost passwords essentially destroying wealth through access denial. Further, custody services can increase broader liquidity for crypto trades by making the underlying coins and assets available for transactions (as opposed to being “stuck” in cold storage).
While it’s not the end-all, be-all for bank stocks, that U.S. Bancorp is embracing the blockchain space gives it street cred for modern-day investors.
Bank Stocks to Buy: Truist Financial (TFC)
Headquartered in Charlotte, North Carolina, Truist Financial (NYSE:TFC) commands a significant presence in the Tar Heel State. According to one news source in 2021, “People are flocking to North Carolina. The numbers show a town just west of Raleigh secured a top 10 spot on the list of cities attracting millennials.”
Another report indicates that “North Carolina was named the sixth-most popular state for moving millennials after adding more than 8,700 in 2019.” Over the next few years, it’s possible that North Carolina will expand its population through massive trends like work from home and soaring inflation making living in high-priced metropolitan areas impossible.
Obviously, demographic trends are incredibly powerful and that makes TFC one of the bank stocks to consider for your portfolio. Essentially, it’s best to set up shop where the people are – and more importantly where they’re going. With so many (young) newcomers to the state, Truist Financial should have a bright future.
Prosperity Bancshares (PB)
I have a lot of love for the Carolinas. But if there’s one area that seemingly every millennial disgruntled with states like California and New York are talking about, it’s Texas.
According to a local news report, “More than 187,000 of people between the ages of 25 and 39 landed in the Lone Star State in 2019, the biggest gain for that generational group in the U.S. Texas is followed by Colorado, Washington state, Arizona and Florida for millennial migration.”
You can talk all about the rising liberal ideology in the U.S., which is a fact according to a Gallup poll. However, political identity has a price apparently. But that’s all fine and well with Prosperity Bancshares (NYSE:PB). Featuring a strong presence in the Lone Star State, PB could potentially advantage the above demographic transition.
Better yet, Prosperity lives up to its name, featuring robust growth during the new normal. In both 2020 and 2021, the company posted revenue exceeding $1 billion, up significantly from the $833 million generated in 2019. If demographics is destiny, PB belongs on your list of bank stocks to buy.
First Republic Bank (FRC)
Headquartered in San Francisco, California, First Republic Bank (NYSE:FRC) might be a cynical play among available bank stocks to buy. Catering to low-risk, high net-worth clientele – you gotta love the euphemisms! – First Republic probably isn’t a company that will rank super high on any ESG (environmental, social, governance) lists. Still, from a strictly financial perspective, it’s very compelling.
The reason? Obviously, affluent households are always looking to maintain their wealth. The problem is, the post-Covid paradigm presents unusual, even unprecedented dynamics. Clearly, money management is at a priority since receiving the wrong advice could be extremely costly. Therefore, you’d imagine that First Republic’s wealth management services will be in huge demand.
Furthermore, you should also consider the company’s demographic realities. FRC is heavily concentrated in northern California, which is an economic powerhouse. As a whole, the Golden State contributes $3 trillion in GDP, which would make it the fifth-largest economy if California were its own country.
Patriot National Bancorp (PNBK)
One of the regional bank stocks that’s up on a YTD basis (nearly 10% at the time of writing), Patriot National Bancorp (NASDAQ:PNBK) presents an interesting opportunity for those who want to diversify away from the biggest players in the segment. Still, that doesn’t mean Patriot National is a slouch – far from it.
As a lifelong west coast person, I’m not familiar with the regional dynamics on the east coast. That said, I do have the internet, which tells me that Patriot is in prime territory. Based in Stamford, Connecticut and serving its home market along with New York, the financial institution serves a lucrative clientele base.
Back in 2013, The Guardian noted that Stamford, along with Bridgeport and Norwalk feature the densest concentration of wealth in the U.S. Therefore, these folks hardly felt the impact of the Great Recession.
Now, if another recession occurs again, no guarantee exists that these fortunate people will be smiling. Nevertheless, if you wanted to dive into bank stocks, it might be smart to find names exposed to the richest – and therefore, the most insulated.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.