The banking sector has been in the spotlight this year, as a series of events shook the industry and the markets. In March, a wave of bond selloffs triggered by rising inflation expectations caused massive losses for banks holding long-term debt securities. In April, several regional banks collapsed due to liquidity problems and credit quality issues, sparking fears of a systemic banking crisis. Though there have been no subsequent bank failures in recent months, the United States government faced a wave of credit downgrades, which also weighed heavily on bank stocks.
These events culminated in both challenges and opportunities for bank stocks. In this article, we will review three of the best bank stocks investors should consider buying in September 2023.
Bank of America (BAC)
Bank of America (NYSE:BAC) is one of the largest commercial and investment banks and wealth management services providers in the world. Warren Buffett’s favorite bank stock has benefited from its diversified revenue streams, strong capital position and cost-cutting initiatives. In the second quarter of 2023, Bank of America reported a 19% year-over-year (YoY) increase in net income to $7.4 billion, driven by higher net interest income, lower credit costs and improved trading and investment banking fees. Bank of America also reported the better-than-expected performance of the American economy was also a key driver of client growth.
Given the bank’s strong financial performance and relatively high dividend yield, shareholders have a lot to be hopeful about, even if Bank of America’s shares have not outperformed year-to-date (YTD). Bank of America’s forward price-to-earnings ratio is around 8.9x, an attractive valuation for America’s second-largest bank. Investors should take notice.
Wells Fargo (WFC)
Wells Fargo (NYSE:WFC) is one of the largest U.S. retail and commercial banks, focusing on consumer lending, mortgage banking and wealth management. The institution has been recovering from a number of scandals and regulatory issues — one of which could lead to jail time for an executive. The bank also had to pay out $3 billion in penalties in 2020.
Recently, the bank showed signs of operational improvement and growth momentum. In the second quarter of 2023, Wells Fargo reported a 57% increase in net income to $4.9 billion, driven by higher net interest income and fee income growth across most business segments.
The bank will likely benefit from a soft landing scenario for the U.S. economy, which gives another reason for investors to be bullish on this stock. Furthermore, Wells Fargo’s shares are currently trading at a forward price-to-earnings ratio of 8.9x. The bank also boasts a dividend yield of 3.4%. Ultimately, despite the scandals, Wells Fargo proved it can maintain a high capital efficiency ratio while also growing bottom-line profits for shareholders.
PNC Financial Services Group (PNC)
PNC Financial Services Group (NYSE:PNC) is one of the largest U.S. regional banks, with operations in 29 states and the District of Columbia. The bank offers a range of financial services, including retail banking, corporate banking, asset management and residential mortgage banking. The bank expanded its presence and scale through strategic acquisitions. For instance, it purchased BBVA USA in June 2021, adding $66 billion in loan assets and $86 billion in deposits to PNC’s balance sheet.
Because PNC is a regional bank, it was negatively affected by the banking crisis earlier this year. Not only did shares fall 26% YTD, but deposit growth also fell during the bank’s recent second quarter. Nonetheless, PNC’s shares are trading at 8.9x forward earnings. As the American economy recovers from high inflation, PNC’s deposit growth and overall platform could reinvigorate. As many have reiterated in the past, when investors are scared, it’s time for other investors to be greedy.
On the date of publication, Tyrik Torres did not hold (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.
