Best regional bank stocks 2019 -
COVID Impact on the banking sector COVID Impact on the banking sector COVID Impact on the banking sector
COVID has generated significant instability and high volatility in global capital markets. While the full impact is yet to be determined, it’s expected that the adverse impact are likely to continue from the virus’ knock-on effects. As part of our Global banking M&A outlook H2 report, we explore the areas of the overall banking sector most likely to be impacted, including valuation and profitability.
The areas that are likely to be most impacted by COVID are:
Profitability and credit management/cost of risk
The low interest rate scenario, along with the significant impact of the COVID, is reducing the core banking profitability in mature markets. Financial institutions are thus shifting towards commission-based income from the likes of payments and tech businesses.
One of the immediate effects of the health emergency on the real global economy is the increased credit risk of corporate and retail clients of the banks. In order to continue financing the real economy and support its recovery, banks are called to distinguish between purely temporary phenomena, destined to be reabsorbed in a short time, and longer lasting impacts which would require actions of management and reclassification.
The primary aspects to be considered are:
- the forward-looking information update -- in particular, the way in which new information must be incorporated into risk parameters needs to be carefully analyzed, given the peculiar nature of COVID This may last for a lesser time than cyclical downturns induced by economic -financial causes;
- the update of the 'default rates' which needs to take into account any waivers granted by the authorities in relation to only temporary phenomena of expiry of the creditworthiness;
- the definition of the most appropriate timescales for updating the 'recovery rates' in order to be able to factor in the positive effects -- albeit inevitably in the medium term -- deriving from the credit recovery policies which could introduce forms of deferred payments or agreements on longer maturities (restructuring debt, etc.);
The contraction in economic activity is having adverse consequences on credit quality as banks are increasing loan loss provisions. A few European banks, have already posted significant losses in Q1'20 (Jan-Mar) to face a potential surge in bad loans.
- The corrective actions of governments aims to mitigate the risk profiles through further incentives for disposals.
- It is likely that the future market of synthetic securitizations may require a revitalization after recent developments and important economic impacts that could come as a result.
- Over the past few years, several European banks have finalized important disposal operations of impaired loans, contributing to a significant reduction of the NPL ratio. Among the prominent evolutionary trends in the market, it is possible to identify the strong interest on the unlikely-to- pay (UTP) loans, the birth of a fervent secondary market for bad debts and the amalgamation of homogeneous large-ticket asset classes in the construction of portfolios intended for the market i.e., so-called single names.
Customer relationship and commercial models
- Although COVID may lead to a crisis in the real economy, the impact on the banking system and on the bank -customer relationship can also be defined as a 'positive discontinuity' for the purpose of digitization of the sector and the ability to offer an excellent customer experience.
- Banks, even the most territorial and branch-centric ones, are forced to encourage the use of channels that have never been their strategic priority. This phase would be particularly complex, which banks need to address by demonstrating real proximity with their customers.
- The clear understanding by banking operators of their gap in the provision of services, becoming more tangible than ever before with COVID, could make them even more inclined to accelerate the digital transformation path through partnerships and collaborations within the fintech community.
Operational resilience and business continuity management
- The provision of technological innovation can play an important role in guaranteeing the business continuity of the banks: the activation and enhancement of robotics solutions or artificial intelligence (e.g., Advanced BOTs that support the processes of adoption of the technologies displayed on the channels direct) and mobility (e.g., platforms for the management of promoters and systems authorizations), if applied to critical processes, would allow for an easier protection in case of absence of staff.
- Given the necessity to have an unpredictable availability of infrastructural resources, there is a clear opportunity also for the financial sector to evaluate the benefits of applicable Cloud technologies.
High volatility in stock markets depressed banks' valuation…
COVID has generated significant instability and high volatility in global capital markets. The financial sector has been one of the most affected, with bank valuations dropping in all countries around the world (P/NAV multiple experienced a severe downfall from x on 31 December to x on 30 April ). At the regional level, North American banks are still trading at P/NAV equal to an average x, while Asian and European banks (with the exception of the Nordics) are currently trading at significant discount levels (with average P/NAV at x and x, respectively).
Banking stocks were impacted during COVID In the period from 01 December to 30 April -- most banks saw a price slump in mid-March. European banks were adversely impacted as the Euro STOXX banks index saw a massive decline of percent followed by STOXX North America banks index ( percent) and STOXX Asia/Pacific Banks Index ( percent) for the given period.
…whilst keeping a strong correlation with profitability
A strong correlation between bank valuation and profitability is envisaged by the regression analysis. North American banks in particular are experiencing higher valuations due to a relatively higher profitability, mainly driven by the diversification of the business activity (e.g. investment banking services), with RONAV equal to percent on average, compared with percent and percent in Asian and European banks, respectively. At a regional level, assuming a RONAV equal to 10 percent, the implied P/RONAV is equal to x, x and x in North America, Europe and Asia respectively.
The 10 best bank stocks to buy for Heading into the New Year, the economy seems to be doing…
The 10 best bank stocks to buy for
Heading into the New Year, the economy seems to be doing well, with GDP growing by 3 percent or so, relatively low inflation, and s tax cuts providing heavy fiscal stimulus to the economy and corporate America. But in the fourth quarter of , markets went south, as concerns about overvaluation, a slowing China, a flattening yield curve, the trade war and rising interest rates struck fear into investors. That said, the underlying fundamentals still look solid, and rising rates should actually benefit financials on the whole. Here are 10 of the best bank stocks to buy for
Citizens Financial Group (ticker: CFG)
The $15 billion Citizens Financial Group is a holding company that owns Citizens Bank, a regional bank conducting both consumer and commercial banking services for clients. After getting walloped in , CFGs extremely cheap valuation makes it one of the best bank stocks to buy for , and is perhaps best suited for investors willing to go against the tide. Although the bank has defended its actions, concerns that Citizens is named in special counsel Robert Muellers indictment of Paul Manafort helped instigate the 24 percent sell-off. Now trading at 10 times earnings, a price-earnings-growth ratio of just , and boasting a percent dividend, CFG is an outright steal.
Morgan Stanley (MS)
One of the major Wall Street banks, Morgan Stanley had a rough as the sell-off in financials didnt do any favors for MS stock. Thankfully for opportunistic investors, shares are selling at extremely attractive multiples: a P/E of , PEG of , and a price-book ratio less than 1. Morgan Stanley, which helps companies go public, underwrites debt, provides mergers and acquisitions advice, offers wealth management to mention just a few services is doing well. In the third quarter, revenue rose percent, earnings per share jumped 26 percent, and its efficiency ratio improved to 71 from 73 percent a year prior.
CME Group (CME)
One of the few picks making the list of best bank stocks to buy for the second consecutive year is CME Group, the options and futures exchange. Though technically not a bank, CME is certainly a financial stock, and its coming off a great in which shares rose nearly 30 percent. One reason CME Group is fitting entering is its lack of correlation with traditional bank stocks: In times of higher volatility and uncertainty over interest rates, CME benefits as investors frantically trade. The owner of the Chicago Mercantile Exchange, New York Mercantile Exchange and Commodity Exchange is expected to grow revenue by 24 percent in
JPMorgan Chase & Co. (JPM)
The last remaining big bank CEO that navigated his firm through the financial crisis and remains at the helm calling the shots is Jamie Dimon, whose prestige has expanded enormously after leading his firm through the roughest waters in modern financial history. JPMorgan is the largest bank in the U.S. and is currently thriving, raising its dividend payout by 40 percent in Its 3 percent yield and $ trillion in assets make it less volatile than your average bank stock, and with Dimon serving through and a new, $4 billion investment from Warren Buffetts Berkshire Hathaway (BRK.A, BRK.B) in the third quarter, JPM is a blue-chip portfolio anchor.
Goldman Sachs Group (GS)
Investors have the rare opportunity to take advantage of a market overreaction that makes Goldman Sachs one of the best bank stocks to buy for With shares off a remarkable 30 percent for midway through the month of December, nothing much has changed with the business: Goldman remains the gold standard for Wall Street banking services like investment banking, market-making, research and brokerage offerings, to name a few. The catalyst behind Goldmans decline, however, is the visible 1MDB scandal, which made GS $ million money Malaysia now wants refunded. For a $67 billion behemoth trading at times book and 7 times earnings, Goldmans bargain-bin price seems unjustified.
PayPal Holdings (PYPL)
More a financial than a bank, PayPal gives investors a pure-play opportunity on something sure to blossom in the coming years and decades: digital payments. One of the few large-cap growth stocks on this list, PayPals both established and exciting, with its mobile payments platform Venmo growing total payment volume by 78 percent in the third quarter. Active account growth across PayPal accelerated in the quarter, and with margins expanding, revenue growth of 14 percent drove 26 percent EPS growth. Recent partnerships with American Express Co. (AXP) and Walmart (WMT) should both drive adoption and boost PYPLs competitive advantages.
Berkshire Hathaway (BRK.A, BRK.B)
Perhaps the ultimate financial powerhouse, Berkshire owns meaningful percentages of many of the best bank stocks to buy for Berkshire Hathaway owns percent of Goldman Sachs, percent of U.S. Bancorp (USB), and an incredible percent of American Express. Every time these portfolio companies buy back stock, Berkshires ownership stake grows. A major beneficiary of tax reform Berkshires income tax rates fell from percent in to percent in Warren Buffetts sprawling holding company is such a cash cow that its hard to see it coming to an end until mankind itself does.
U.S. Bancorp (USB)
As noted, Buffett, widely considered the best investor in the world, owns a big chunk of U.S. Bancorp through his holding company Berkshire Hathaway. In , Berkshire actually backed up the truck, increasing its ownership of USB by more 20 percent in the first three quarters alone. The conservatively run $80 billion company offers both commercial and retail banking services, boasting over 3, offices primarily located on the West Coast and in the Midwest. Having grown its dividend for seven consecutive years, USB now yields a solid 3 percent, which is currently more than the year Treasury yield. U.S. Bancorp has been around since
Interactive Brokers (IBKR)
While again taking some liberties with the term bank stocks for the sake of quality, Interactive Brokers is one of the more compelling and under-respected opportunities in the financial sector. An online broker heavily focused on access to international markets and built around automation and extremely low transaction costs, IBKR clients include hedge funds, mutual funds, financial advisors and individual investors. IBKR accounts grew 25 percent year-over-year to , in November, and thankfully for investors, 65 percent of revenue is now generated by interest income money earned on customer deposits, margin lending, etc. rather than commissions, an area under intense competitive pressure. A PEG ratio of underscores IBKRs value.
American Express Co. (AXP)
Last but not least, credit card giant American Express is another one of the best financial stocks to buy for With Berkshire as a 17 percent owner, youre in good company owning one of the few major credit card companies around and the one thats differentiated from its peers through its high-fee, high-reward cards. A percent dividend, which has been growing for six years, is one reward that patient shareholders will appreciate. In the most recent quarter, revenue grew by 9 percent and EPS jumped 29 percent as AXP continued to aggressively buy back stock.
The best bank stocks to buy for
To review, these are the 10 best bank stocks to buy for
Citizens Financial Group (CFG)
Morgan Stanley (MS)
CME Group (CME)
JPMorgan Chase & Co (JPM)
The Goldman Sachs Group (GS)
PayPal Holdings (PYPL)
Berkshire Hathaway (BRK.A, BRK.B)
U.S. Bancorp (USB)
Interactive Brokers (IBKR)
American Express Co. (AXP)
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10 of the Best Bank Stocks to Buy for originally appeared ontraitortrump.us
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3 Affordable Bank Stocks With Solid Dividends
For conservative investors, these bank stocks are good names to buy in the current environment
By Larry Ramer, InvestorPlace Contributor Mar 2, , pm EST
It could hardly be a better time to buy bank stocks. Interest rates are climbing, enabling banks to earn much more money from their loans and credit cards. Meanwhile, the economy is improving by leaps and bounds.
The latter trend should continue as tens of millions of more Americans are vaccinated against the novel coronavirus. The vaccinations, in turn, should boost the energy, tourism, and transportation sectors, allowing banks to make many more highly secure, profitable loans.
For conservative investors seeking relatively high dividend payments, affordable bank stocks that can climb significantly, and secure names, I believe that large regional banks are the best bet. In addition to meeting all of those criteria, they can also easily become takeover targets.
Moreover, all three of the names that I’m recommending were identified in January by Goldman Sachs as being among the best regional bank stocks.
Here are three bank stocks to buy:
- Citizens Financial (NYSE:CFG)
- Regions Financial (NYSE:RF)
- KeyCorp (NYSE:KEY)
Bank Stocks to Buy: Citizens Financial (CFG)
Goldman analyst Ryan Nash expects Citizens Financial’s earnings per share to double versus last year to $ Based on his estimate, the bank is trading at a forward price-earnings ratio of about 10x.
In today’s high-valuation stock market, that’s a refreshingly low valuation.
What’s more, Citizens has an operating margin of 25% over the last year, and its total debt plunged to $ billion as of December from $14 billion at the end of
Impressively, despite a difficult comparison due to the pandemic, the bank’s revenue increased 4% year-over-year in Q4, and the company expects its loan growth to come in at a healthy 5% to 9% this year.
Given the recent increase in interest rates, the bank’s forecast for a net interest income decline in looks very conservative. CFG stock has a very attractive dividend yield of %.
Regions Financial (RF)
Source: Jonathan Weiss / traitortrump.us
Another affordable large regional bank stock, Regions is trading at a forward P/E of just Despite the pandemic, its top line rose to $ billion from $ billion in
Regions’ total debt plummeted to $ billion at the end of from $ billion on the final day of Its debt is miniscule compared with the value of its total assets, which stood at $ billion as of the end of last year.
Goldman’s Nash expects Regions’ results to be boosted by strong reserve releases this year, and the bank’s dividend yield is 3%.
On Feb. 1, Terry McEvoy, an analyst at Stephens, upgraded RF stock to overweight, praising what the analyst sees as its “ability to deploy excess liquidity, disciplined expense management, and its hedging strategy to protect net interest income.” As a result of these points, McEvoy expects the company’s net revenue, excluding provisions, to come in above analysts’ average outlook.
For Q4, the bank’s EPS came in at 62 cents versus the average outlook of 42 cents, as its net interest income impressively climbed over 10% on a year-over-year basis.
Source: JHVEPhoto / traitortrump.us
In Q4, KeyCorp’s top and bottom lines came in meaningfully above analysts’ average estimates, as its revenue soared nearly 13%. Showing its strong underwriting capabilities, its provision for credit losses came in at just $20 million, versus the mean estimate of $ million.
According to Seeking Alpha, KeyCorp has a “strong capital position,” and the bank authorized “up to $ million” of share repurchases.
Research firms Jefferies and Evercore were upbeat on KeyCorp’s guidance, while Goldman’s Nash believes that it is poised to deliver strong, positive operating leverage this year.
KEY stock trades at a forward price-earnings ratio of and has a very attractive forward dividend yield of %.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Larry Ramer has conducted research and written articles on U.S. stocks for 14 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in Among his highlysuccessful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at@larryramer.
Article printed from InvestorPlace Media, traitortrump.us
© InvestorPlace Media, LLC
Royal Bank of Canada
About Royal Bank of Canada
Royal Bank of Canada is a diversified financial services company. The Company provides personal and commercial banking, wealth management services, insurance, corporate and investment banking, and transaction processing services. The Company serves personal, business, public sector and institutional clients in Canada, and the United States. The Company's business segments include Personal & Commercial Banking, Wealth Management, Insurance, Investor & Treasury Services, Capital Markets, and Corporate Support. The Company, through its segments, serves various lines of businesses, which include personal financial services, business financial services, cards and payment solutions, and United States banking, Canadian wealth management, United States and international wealth management, global asset management, Canadian insurance, international insurance, corporate and investment banking, global markets and other.
Kathleen P. Taylor
Independent Chairman of the Board
David I. McKay
President, Chief Executive Officer, Director
Chief Financial Officer
Group Head and Chief Executive Officer - Capital Markets
Chief Human Resource Officer
mean rating - 15 analysts
Revenue (MM, CAD)
Price To Earnings (TTM)
Price To Sales (TTM)
Price To Book (MRQ)
Price To Cash Flow (TTM)
Total Debt To Equity (MRQ)
LT Debt To Equity (MRQ)
Return on Investment (TTM)
Return on Equity (TTM)
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- Mortgage Banking Lagniappe (Part II)
- Mortgage Banking Lagniappe
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