Five bank stocks to explore as rate hike prospects grow

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Five bank stocks to explore as rate hike prospects grow

 Five bank stocks to explore as rate hike prospects grow
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Highlights

  • Bank of America Corporation (NYSE: BAC) stock grew over 49% in one year. Its P/E ratio is 14.17.
  • Wells Fargo & Company’s (NYSE: WFC) dividend yield is 1.52%. Its net interest margin was 2.03% in the first nine months of 2021.
  • Signature Bank (NASDAQ: SBNY), founded in 2001, has a P/E ratio of 24.44.

On Wednesday, the Federal Reserve released the minutes of its December meeting. The minutes indicated that an interest rate hike might be on the anvil as early as March. 

The bank voiced concerned about the rising inflation and tight labor market that could adversely impact recovery. Most economists expect a hike of a three-quarter percentage point. 

Hence, banking stocks might be worth revisiting amid these developments. Some of them were already trending on Wall Street Thursday. The financial sector companies include retail and commercial banks, insurance, asset management, brokerage, credit card providers.

Here, we discuss five banking stocks that grew more than 49% in a year.

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Bank of America Corporation (NYSE: BAC)

The Charlotte, North Carolina-based Bank of America is one of the oldest and the largest financial institutions in the US. It operates in four segments: consumer banking, global banking, global markets, and global wealth and investment management. 

Its consumer banking business includes retail banking operations, credit and debit card offerings, vehicle loans, home mortgage loans, and small-business services. 

The wholesale segment of the business includes investment banking, capital markets operations, and corporate and commercial real estate lending. 

Its Merrill Lynch operations provide wealth-management and brokerage services.

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BAC has a market capitalization of US$407 billion. Its P/E ratio is 14.17, and the forward P/E one year is 13.52. The current dividend yield is 1.75%, and the annualized dividend is US$0.84.

The stock traded in the range of US$48.69 to US$29.57 in the last 52 weeks and closed at US$47.18 on Jan 5, 2021.

For the nine months ended Sept 30, 2021, it posted net revenue of US$67.05 billion compared to US$65.42 billion in the corresponding period of the previous year. 

Its net income was US$23.78 billion or US$2.75 per share diluted compared to US$11.27 billion or US$1.28 per share diluted for the nine months in 2020.

Its net interest margin is 1.9%.

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Wells Fargo & Company (NYSE: WFC)

The San Francisco, California-based Wells Fargo is one of the largest banks in the US, with approximately US$1.9 trillion in assets. 

Its operating segments include consumer banking, wealth & investment management, corporate and investment banking, and commercial banking. 

The bank has around US$1.9 trillion in assets as of Sept 30, 2021.  

Wells Fargo’s market capitalization is US$208.5 billion, the P/E ratio is 12.33, and the forward P/E one year is 11.29. The dividend yield is 1.52%, and the annualized dividend is US$0.80.

The stock traded in the range of US$53.15 to US$29.68 in the last 52 weeks. It closed at US$52.29 on Jan 5.

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Its total revenue increased 3% YoY to US$57.6 billion for the nine months ended Sept 30, 2021, compared to US$55.77 billion for the same period a year ago. The net income applicable to common stock was US$14.78 billion against a net loss of US$0.955 billion a year ago. The net interest margin was 2.03% for the first nine months of 2021, on a taxable equivalent basis.

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SVB Financial Group (NASDAQ: SIVB)

The Santa Clara, California-based SVB Financial Group offers loans and other financial services to venture capital firms, private equity, and startups. Its operating segments are SVB Private Bank, SVB Capital, SVB Leerink, and Global Commercial Bank. The company also invests directly in private equity and venture capital funds. 

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SVB Financial has a market capitalization of US$40.02 billion. Its P/E ratio is 20.82, and the forward P/E one year is 20.83. The stock moved in the range of US$763.22 to US$390.43 in one year. SIVB closed at US$681.93 on Jan 5, 2021.

For the nine months ended Sept 30, 2021, its net interest income was US$2.24 billion compared to US$1.57 billion in the first nine months of the prior year. The net income was US$1.4 billion or US$25.16 per share diluted compared to US$0.803 billion or US$15.46 per share diluted a year ago. Its net interest margin was 2.08% in the first nine months of Sept 30, 2021.

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Fifth Third Bancorp (NASDAQ: FITB)

It is a diversified financial-services company based in Cincinnati, Ohio. Bancorp has four operating segments: Branch Banking, Commercial Banking, Consumer Lending, and Wealth and Asset Management. 

The company had US$208 billion in assets as of Sept 30, 2021. It operated 1,100 full-service banking centers and 2,336 ATMs in 11 states in the US.

It has a market capitalization of US$31.68 billion, the P/E ratio is 12.83, and the forward P/E one year is 12.32. The current dividend yield is 2.58%, and the annualized dividend is US$1.20.

The stock traded in the range of US$47.31 to US$28.25 in the last 52 weeks. It closed at US$46.43 on Jan 5.

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It reported a net interest income of US$3.57 billion for the nine months ended Sept 30, 2021, compared to US$3.6 billion for the corresponding nine months of 2020.

In the year-ago period, the net income was US$2.11 billion or US$2.83 per share diluted, versus US$0.823 billion or US$1.04 per share diluted for the first nine months of 2020. Its net interest margin on an FTE basis (non-GAAP) was 2.61% for the nine months ended Sept 30, 2021.

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Signature Bank (NASDAQ: SBNY)

It is a New York-based commercial bank founded in 2001. Its operating segments are Commercial banking and Specialty finance. It has 36 private client offices in New York.

Its commercial banking segment includes commercial real estate lending, commercial & industrial lending, and commercial deposit gathering activities.

The Specialty Finance segment includes financing and leasing products.

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It has a market capitalization of US$20.68 billion. Its P/E ratio is 24.44, and the forward P/E one year is 23.26. The current dividend yield is 0.67%, and the annualized dividend of US$2.24.

The stock price moved between US$347.40 and US$138.87 in the last 52 weeks. It closed at US$341.00 on Jan 5, 2021.

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The net interest income after provision of credit losses was US$1.30 billion for the nine months ended Sept 30, 2021, compared to US$0.911 billion for the same period in 2020.  

The net income grew to US$617 million or US$10.68 per share diluted compared to US$355 million or US$6.70 per share diluted in the same period of 2020. 

The net interest margin was 1.99% for the period in 2021.

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Bottomline

The banking stocks have performed well in 2021. However, they typically do well when the interest rates are high. The rate hike and an improved margin would give them a tailwind in 2022.

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