7 Bank Stocks to Buy on the Dip

  • JPMorgan Chase (JPM): The largest U.S. bank has a fortress balance sheet.
  • Goldman Sachs (GS): The leading investment bank is cutting jobs and bonuses as it tries to right size its operations.
  • HSBC (HSBC): The largest lender in Europe is a safe international bank stock.
  • Continue reading for the complete list of bank stocks to buy on the dip!
bank stocks to buy on the dip - 7 Bank Stocks to Buy on the Dip

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Bank stocks continue to be volatile as professional traders and individual investors try to assess how bad the problems in the sector really are following the collapse of three lenders in the U.S. and the $3.2 billion takeover of Switzerland’s Credit Suisse (NYSE:CS) by rival UBS (NYSE:UBS). As the U.S. government steps in to guarantee the deposits at now defunct Silicon Valley Bank, and the largest banks in America inject $30 billion of deposits into troubled lender First Republic Bank (NYSE:FRC), investors have been understandably rattled and moved their money out of bank stocks. However, by most accounts, the selloff of bank stocks has been an overreaction. By nearly all accounts, this is not a repeat of the 2008-09 financial crisis. The good news for long-term investors is that many rock-solid bank stocks are now on sale as their share prices have been pushed lower in recent weeks. Here are seven bank stocks to buy on the dip.

JPM JPMorgan $127.18
GS Goldman Sachs $313.67
HSBC HSBC $34.30
WFC Wells Fargo $37.20
BAC Bank of America $27.64
USB US Bancorp $34.79
PNC PNC Financial $124.40

JPMorgan Chase (JPM)

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Let’s begin with JPMorgan Chase (NYSE:JPM), which remains the largest U.S. bank by market capitalization. Few banks are as solid today as JPMorgan Chase. Many analysts refer to the lender as having a “fortress balance sheet.” And despite the turmoil of financial markets over the past year, JPMorgan Chase has found a way to continue reporting strong quarterly earnings. The bank’s profit for the fourth and final quarter of 2022 was $11 billion, or $3.57 per share, compared with $10.4 billion, or $3.33 per share, during the same period a year earlier.

The revenue of JPMorgan’s investment-banking unit continued to decline in Q4 due to a lack of deals caused by the stock market’s struggles. The investment banking unit’s revenue declined 57% year-over-year last quarter.

However, the lender’s trading revenue grew amid the market volatility as investors repositioned their portfolios to navigate the current high interest-rate environment. Moreover, the bank’s revenue from fixed income trading rose 12% YOY in Q2, .

It should come as no surprise that JPMorgan CEO Jamie Dimon is reportedly advising First Republic Bank on its recovery plan given the clout that JPM and its management team have in the global banking sector.

Goldman Sachs (GS)

In this photo illustration the Goldman Sachs Group (GS) logo displayed on a smartphone screen and a stock market graph in the background

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Goldman Sachs’ (NYSE:GS) consumer banking unit, called “Marcus,” got off to a promising start in 2016, but it was hit hard by the Covid-19 pandemic and never recovered. Goldman ultimately lost $3 billion on Marcus, which was rolled into a “platform solutions business” before being shut down and leaving the Wall Street titan with a rare black eye.

However, there is every reason to believe that Goldman Sachs will bounce back and return to its winning ways, making it one of the best  bank stocks to buy on the dip. The company has taken decisive steps to right its ship, including cutting more than 3,000 jobs and slashing its annual bonus payments to bankers by 40%.

The layoffs have been concentrated in Goldman’s investment banking division, whose corporate deal making has meaningfully slowed over the last year. The bank’s CEO, David Solomon, has said that he will refocus the investment bank on what it does best: making money for corporate clients.

HSBC Holdings (HSBC)

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Investors looking for a solid foreign bank outside the U.S. should consider HSBC Bank (NYSE:HSBC). The lender, which began life in Hong Kong and primarily served Asian markets is today based in London and is increasingly focusing on Europe while also trying to break into North America.

In fact, HSBC is now the biggest bank in Europe with more than $10 trillion of assets under custody.  While HSBC recently announced that it was exiting Canada after a failed foray into that market, the sale of its Canadian unit will result in a special one-time dividend payment of 21 cents per share to its stockholders.

HSBC announced the special dividend payment along with strong fourth-quarter results that showed a profit of $5.2 billion, which was 108% higher than the $2.5 billion of net income that  the bank had recorded a year earlier, and higher than the $4.97 billion that analysts who cover the lender had, on average, expected.

Due to the strong Q4 print, HSBC announced a regular dividend payment to shareholders of 40 cents per share, which equates to a yield of 4.72% and is among the highest of any bank.

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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U.S. lender Wells Fargo (NYSE:WFC) made headlines at the start of this year when it announced that it was exiting the multitrillion-dollar U.S. mortgage market. The announcement was a shock given that Wells Fargo was a leader in the U.S. home loan market, managing as much as $201.8 billion of such loans, according to data from Inside Mortgage Finance.

The lender said it was getting out of the real estate game due to a combination of onerous regulations and rising interest rates that have dampened the market over the last year.

Going forward, Wells Fargo plans to focus exclusively on providing home loans for its rich clients of its wealth-management unit.

Additionally, the lender said it was generating more of its revenue from investment banking and credit cards rather than from mortgages and home equity lines of credit (HELOCs). While a surprise, Wells Fargo’s exit from the real estate market is not unprecedented. That’s because JPMorgan Chase got out of the mortgage market after the 2008 financial crisis.

Wells Fargo announced its exit from the housing sector as it reported disappointing Q$ earnings in January.

Bank of America (BAC)

bank of america stock

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Another U.S. lender that is viewed as stable and strong today is Bank of America (NYSE:BAC). The second biggest bank in the U.S. after JPMorgan Chase has come along way since the dark days of the 2008 financial crisis. Between late 2007 and mid-2009, BAC stock declined more than 80%, and, at one point, was trading for just $6 a share and in danger of becoming a penny stock. Fortunately, Bank of America weathered the storm and even purchased financial firm Merrill Lynch coming out of the crisis and is today much healthier than in the past.

Along with JPMorgan, Bank of America helped to organize the group of 11 banks that agreed to deposit $30 billion in troubled lender First Republic to help shore-up its finances and rally confidence in the banking sector. Bank of America is thriving under the leadership of CEO Brian Moynihan, who has the lender focused on consumer banking and loans. That strategy helped Bank of America post a Q4 2022 earnings beat despite a sharp downturn in investment banking revenues. BAC stock is down 15% on the year and a definite buy at current levels.

US Bancorp (USB)

US Bancorp (NYSE:USB) is not quite as well known as the four largest lenders in America. However, US Bancorp is the fifth biggest bank in the U.S. based in assets despite being primarily based in the Midwest. Maybe it’s because of its roots in the American heartland, but U.S. Bancorp has largely avoided scandal throughout its nearly 100 years of existence. And many analysts single the bank out for being one of the best managed financial institutions in the country.

In particular, bullish analysts point out that US Bancorp has low-cost deposits that other banks can’t match, and more than enough funds on hand to cover potential loan losses. The bank also has limited exposure to troubled foreign lenders such as Credit Suisse.

One of US Bancorp’s fans is none other than famed investor Warren Buffett. While he has sold most of his bank stocks in recent years, Buffett continues to own more than 8 million shares of USB stock, worth more than $300 million.

PNC Financial Services (PNC)

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Also among the 10 biggest U.S. banks with more than $500 billion of assets is PNC Financial Services (NYSE:PNC). Like other lenders, PNC stock has been dragged lower by the current banking troubles and investors’ shaky sentiment. However, by all accounts, PNC Financial remains a sturdy bank that has none of the underlying problems that plagued a number of regional banks in recent weeks. In fact, there were rumors that PNC Financial was going to try to buy Silicon Valley Bank following its collapse. But the bank has ruled out that scenario.

The decision to steer clear of Silicon Valley Bank could be a smart one given the financial mess at that institution. PNC’s revenue grew 4% in the final quarter of last year versus the same period a year earlier to $5.76 billion.

During Q4, the company also $1.2 billion to shareholders through its generous dividend that pays $1.50 per share each quarter for a yield of 4.55%. Like its peers, PNC stock has been dragged lower due to the current turmoil of the financial sector.

As the first quarter nears its end, PNC Financial’s stock is down 21%. Investors should view the decline as a buying opportunity.

On the date of publication, Joel Baglole held a long position in BAC. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

Article printed from InvestorPlace Media, https://investorplace.com/2023/03/7-bank-stocks-to-buy-on-the-dip/.

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