If you’re interested in learning the three best bank stocks to buy for the second half of 2022, you’ve come to the right place.
First, to keep things simple, I’ll stick to the 18 bank stocks in the S&P 500. However, except for M&T Bank (NYSE:MTB), they’re all in negative territory through the first six months of 2022.
You would think with interest rates moving higher, banks would be doing a lot better than they are. Not so. Except for energy stocks, much of the S&P 500 is underwater year-to-date.
That said, there is no question that the banking industry’s lot in life ought to improve as these rate increases take hold. If you’re not buying a bank ETF, the tricky part is picking the three best.
How hard can it be to select three winners over the next six to 12 months? Very. But I’m going to try just the same.
|SIVB||SVB Financial Group||$409.07|
|BAC||Bank of America||$30.95|
SVB Financial Group (SIVB)
SVB Financial (NASDAQ:SIVB) is my favorite of the three banks on my list. It’s down 40% this year.
If you’re unfamiliar with SIVB, it’s based in Silicon Valley. Hence the name Silicon Valley Bank, the name of its banking subsidiary. Its other three businesses include SVB Capital, SVB Private, and SVB Securities. Together, they have $220 billion in assets, administer almost $400 billion in client funds, and have a loan portfolio of $69 billion.
SVB Financial focuses on helping the world’s most innovative people, and companies do big things. Today, it does business with approximately 50% of all venture capital-backed tech and life science companies in the U.S.
This explains why SIVB stock is down so much in 2022. Tech stocks have gotten whacked badly this year. SVB provides banking solutions to tech companies and their top employees. Need I say more?
As a result of its Q1 2022 earnings — $7.92 a share and a 15.3% return on equity — SVB raised its revenue outlook for 2022.
“We raised our 2022 revenue outlook, as the March Fed Funds increase and higher interest rates overall accelerated net interest income and core fee income growth. We also raised our outlook for loan growth, due to strong demand from private equity, technology and life science & healthcare clients,” CEO Greg Becker stated in the CEO shareholder letter for the first quarter.
Based on the analyst estimate of $45.84 per share in 2023, SIVB trades at 8.9 times earnings, its cheapest multiple since 2018. It’s a must-buy bank stock at these prices.
Bank of America (BAC)
At the end of March, the second-largest position in Berkshire Hathaway’s (NYSE:BRK-A, NYSE:BRK-B) equity position was Bank of America (NYSE:BAC) at 1.03 billion shares. Today, these shares are valued at $32 billion and account for 10% of the Berkshire equity portfolio.
On June 27, due to it passing the Federal Reserve’s stress test, the bank announced that it would raise its quarterly dividend by 5% to 22 cents in Q3 2022 from 21 cents. The 88 cent annualized dividend payment yields a reasonable 2.7%.
In addition to the dividend payment, it has $17 billion left in its share repurchase program. In the quarter ended March 31, BofA repurchased 57.4 million shares of its stock for $2.65 billion.
The bank paid $46.17 a share during the quarter. Given it trades for 33% less than what it paid to repurchase its shares in the first quarter, you can expect it’s been buying in the second quarter.
Bank of America is a bank stock somewhere between income and growth.
Signature Bank (SBNY)
There are so many banks in America that it’s hard to track. I had never heard of Signature Bank (NASDAQ:SBNY) until I saw it among the 18 S&P 500 banks. Of the 17 analysts covering SBNY stock, all 17 rate it a “buy.”
What did it do to get a perfect score?
The bank was founded in 2001. It is a full-service commercial bank with 38 private client branches in New York, Connecticut, California and North Carolina. It expanded to California in 2018. It now has four private client offices in the state.
In Q1 2022, it generated a record net income of $338.5 million, 78% higher than a year earlier. The bank’s efficiency ratio in the quarter was a ridiculously low 31.81%, 607 basis points lower than Q1 2021 and 50 basis points less than Q4 2021.
Total deposits increased 48% YOY to $109.2 billion, while gross loans were $66.4 billion, 30% higher than last year and 2% above its gross loans in the fourth quarter.
As regional banks go, SBNY is one of the best in America.
On the date of publication, Will Ashworth 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.