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Citigroup is one of two bank stocks Barron finds most attractive.
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Bank stocks started off going strong in 2021, but it’s not too late for investors to find opportunities.
The segment is up 12 percent this year, according to the KBW Bank Index (symbol: BKX), as lenders are slated to begin reporting their fourth-quarter results.
JP Morgan Chase
(JPM),
Wells Fargo
(WFC) and
Citigroup
(C) will begin on Friday.
Bank stocks have rebounded sharply in the past two months of 2020 ahead of a two-week rally. People holding shares were destroyed in March. But it received a reprieve in November as positive news about the vaccine emerged and the election results raised hopes for government spending to drive the economy.
Investors will look for signs that an uptrend can continue. They need evidence that lenders have allocated enough money to cover potential loan losses, and hopefully some people will discuss when the billions they put in reserves can be released. Out as income Investors will also want to listen to the bank’s CEO’s assessment of how quickly the epidemic damages the economy will heal.
While many bank stocks have returned to pre-epidemic levels But some still have gaps to increase before they get there, others may lag behind their peers in valuation.
Barron’s It recently showed a screen of 64 of the largest banks based on price-per-tangible book value, equity return and dividend yield. Using Bloomberg data on average, we found that demographic. According to the trading version at 1.8 times the tangible book value We then look for lenders trading below that level with a track record of delivering higher returns on equity.
(The table shows the results below)
Based on this analysis and qualitative data, we found six banks that could provide two attractive opportunities. Barron’s State it as a self-help story that may represent the most attractive opportunity for investors.
Citigroup and Wells Fargo were trading at 0.9 times tangible book value and 1x tangible book value, respectively.Citigroup shares were beaten, especially late last year when banks were also hit. $ 400 million consent order from regulators for vulnerabilities in risk management and internal controls. The bank has worked to improve those flaws. Stocks will benefit when Jane Fraser takes over as CEO officially next month.
Wells Fargo is in the middle of a multi-year effort to recover from the fake account scandal, which struck in 2016 under Chief Executive Charlie Scharf, who has been in the role for more than a year. More efficient, UBS analysts recently estimated that with a 1 percent drop in bank performance ratios by 2022, every pre-tax income could increase by 3.8 percent.
Goldman Sachs
It wasn’t as heavily impacted as other banks during the downturn of 2020, in fact, with strong trading and deal activity in the second half, stocks were profitable. But despite its strength, Goldman is trading with a tangible book value of 1.3x.It is expected that its capital market activity will remain strong in 2021 and the bank plans to repurchase its shares this year. Therefore still has some juice
Third fifth Bancorp
(FITB) Looks good too. Barron’s Trading screen at 1.4 Tangible book value The bank expects to benefit from its cost savings and share buyback programs while offering a 3.4% dividend yield.
Comerica
(CMA), which trades at 1.2 times the tangible book while offering a yield of 4.3%, could be an attractive opportunity for investors.
Finally, Columbus, Georgia.
Synovus Financial,
Trading at 1.3 times the tangible book and yielding 3.5% is another bank that investors will want to watch. Recently, analysts at Keefe, Bruyette & Woods said the bank was a candidate for a merger that could be a potential merger. Accelerate for stocks
Write to Carleton English at carleton.english@dowjones.com.
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