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Summary
- The US Fed might raise interest rates again after a temporary break, which could potentially revive the financial sector.
- Discover Financial Services operates a payment service and a direct banking service and has a P/E ratio of 7.78 based on Monday’s closing price.
- Fifth Third Bancorp has banking centres and ATMs in the United States and has a P/E ratio of 7.53.
As the central bank hints at continuing its rate hike spree after a temporary break, a revival could potentially be on the way for financial stocks. The financial sector took a major hit earlier this year when the collapse of some of the largest banking institutions was reminiscent of the 2008 crisis.
With inflationary pressures building up, the Fed might decide to increase its interest rate once again. In the post-COVID period, the Federal bank had embarked on rate hike journey that continued for 10 months.
US Fed’s decision this month to not increase its interest rate ended a 10-month long saga of rate hikes in the country. With this backdrop, here are two financial stocks that can be examined by investors wishing to readjust their portfolios in July.
Discover Financial Services (NYSE: DFS)
DFS operates in two segments: direct banking and payment operations. The company also has banking provisions available for its customers, including credit and debit card provisions. The DFS-owned Pulse network is one of the biggest ATM networks in the US.
Discover Financial has a market capitalization of around 30 billion. It reported a net income of US$ 976 million for the first quarter of 2023. For the quarter ended March 31, 2023, Discover Financial reported a net interest income of US$ 3.132 billion.
Meanwhile, the company’s total loans by the end of the period amounted to US$ 112.7 billion, marking a 21% sequential increase. The company also increased its dividend for the quarter from US$ 60 to US$ 70 per share.
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The DFS stock closed at US$ 115.45 on Monday, June 26, 2023, marking YTD gains of 16.85%. DFS has a price to earnings ratio of 7.78, based on Monday’s closing price.
Fifth Third Bancorp (NASDAQ:FITB)
Fifth Third Bancorp has over US$ 200 billion in assets. The company’s services include banking centres and ATMs across the United States.
For the three months ended March 2023, Fifth Third Bancorp reported a net interest income of US$ 1.5 billion. The net income was US$ 558 million and the net income to common stockholders was US$ 535 million for the quarter. The earnings per share for the quarter were reported to be US$ 0.78.
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The FITB stock closed at US$ 25.96 on Monday, June 26, 2023m marking a YTD drop of 21.78%. The stock has a P/E ratio of 7.53 as per its closing price on Monday.
Fifth Third Bancorp announced a cash dividend of US$ US$ 0.33 per share for Q2 2023. It will be made available on July 17, 2023, to shareholders as on June 30, 2023.
