The banking industry has been undergoing a massive overhaul since the past year and the same is expected to continue in the near term. Benefits from the efforts will support the banks' financials, thus boosting their prospects.
While price performance of banking stocks was not impressive in first-quarter 2018 due to several macroeconomic factors that led to huge sell offs, the stocks will be positively impacted by other factors in the quarters ahead.
In the first three months of 2018, the Zacks Major Banks industry
declined 2.7% while Banks & Thrifts rallied 1.2%. Notably, the Zacks Finance sector
fell 2.1%, over the same time frame. Factors to Benefit Banks in Q2
First and foremost is the rising rate environment. Continuation of hike in interest rates (driven by higher inflation prospects and low level of unemployment rate) and the unwinding of the Fed's balance sheet have the potential to boost banks' revenues significantly. Therefore, this will likely keep the momentum going for the banks.
Secondly, the new tax legislation will lower effective tax rates for some of the big names in the industry such as JPMorgan JPM
, Bank of America BAC
and Citigroup C
. This will, thus, enable them to earn more profit. Additionally, reduced tax rates will likely provide stimulus to the economy, therefore indirectly benefiting banks.
Thirdly, banks' continuous focus on digitization of banking operations reflects a move toward more customer friendly services. Banks have been undertaking efforts to align their banking network according to clients' needs and upgrading ATMs with latest technology. These are expected to result in more customer engagement at a lower cost.
Lastly, as the bill on rolling back of the 2010 Dodd-Frank banking legislation is expected to become a law soon, all banks, big-and-small are expected to reap benefits. The bill is aimed at lowering compliance costs and hence will help boost profitability.
With banks gaining from the above-mentioned factors, this is the right time to add a few stocks to your portfolio at low prices and get attractive returns in the quarters ahead. Choosing the Winning Bank Stocks
Though all banks are expected to gain in the coming days, picking a handful of these is not an easy task.
Hence, we have taken the help of the Zacks Stock Screener
to shortlisted bank stocks with a projected first-quarter 2018 earnings growth rate of 10% or more and market capitalization greater than $2 billion. Further, shares of these banks have outperformed their respective industries in the first quarter.
Also, these stocks carry a Zacks Rank #1 (Strong Buy) or #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here
Here are the five bank stocks:
Headquartered at Dallas, TX, Comerica Incorporated CMA
has a Zacks Rank #2 and a market cap of $16.2 billion. The company's earnings are expected to grow at a rate of 30.6%. Moreover, the company's shares have rallied 10.5% in the first quarter against industry
's decline of 2.6%.
Fifth Third Bancorp FITB , based in Cincinnati, OH, carries a Zacks Rank #2 and has a market cap of $21.3 billion. The company's earnings are projected to increase at a rate of 26.3%. Also, its shares have gained 4.7% in the first three months of 2018 against 2.6% decline of the industry it belongs to.
With market cap of $2.4 billion, BofI Holding, Inc. BOFI has a Zacks Rank #2. This San Diego, CA-based company's earnings are expected to be up at a rate of 30.2% for first-quarter 2018. Further, the company's shares have surged 35.6% in the quarter, outperforming industry 's rally of 2.1%.
BOK Financial Corporation BOKF , headquartered at Tulsa, OK, carries a Zacks Rank #2 and has a market cap of $6.3 billion. The company's earnings are expected to rise at a rate of 12.6%. The company's shares have gained 7.3% in the first three months of 2018 against industry 's decline of 3.3%.
M&T Bank Corporation MTB , based in Buffalo, NY, carries a Zacks Rank #2 and has a market cap of $26.7 billion. The company's earnings are expected to increase at a rate of 26.5% for the first quarter. Also, its shares have rallied 7.8% in the first three months of the year against 2.6% fall of the industry it belongs to.
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Comerica Incorporated (CMA): Free Stock Analysis Report M&T Bank Corporation (MTB): Free Stock Analysis Report Fifth Third Bancorp (FITB): Free Stock Analysis Report BOK Financial Corporation (BOKF): Free Stock Analysis Report BofI Holding, Inc. (BOFI): Free Stock Analysis Report JPMorgan Chase & Co. (JPM): Free Stock Analysis Report Citigroup Inc. (C): Free Stock Analysis Report Bank of America Corporation (BAC): Free Stock Analysis Report To read this article on Zacks.com click here.