Financial stocks can play an important role in your portfolio.
Rising interest rates are creating a series of disruptions for the economy, including higher borrowing costs for both consumers and businesses. But changes in rates aren’t bad for everyone, as evidenced by the strength of select stocks in the financial sector recently. As interest rates rise, some banks and asset managers see better returns on their idle cash, as well as higher interest payments from the loans they extend. The following nine bank stocks are all exhibiting specific strength right now in light of the changing interest rate environment, and have strong momentum as the stock market, off its summer lows, heads into the fall.
American Express Co. (ticker: AXP)
One of the most iconic credit services companies on the planet, American Express is in a great position in 2022 for two reasons. Firstly, a rising rate environment means it can enjoy better interest on its loans to businesses and consumers. And secondly, AXP is a decidedly upmarket brand that typically is used by affluent consumers and businesses with deep pockets. That means less chance of bad debts if things sour for the broader economy even as it commands higher rates. Earlier this year, the company issued its first dividend bump since before the pandemic and is plotting an impressive 25% or so in revenue growth this fiscal year, so now may be a great time to consider putting American Express in your wallet.
Dividend yield (trailing 12 months): 1.3%
BancFirst Corp. (BANF)
BancFirst is a roughly $4 billion regional bank serving Oklahoma and Texas via just over 100 physical locations in the region. It is among the best-performing stocks on Wall Street this year, with a simply amazing 52% return this year through Sept. 1. That’s due to strong fundamentals and continued growth thanks to recent acquisitions. Specifically, in July it delivered yet another beat on both the top and bottom line as it continues to work in the business of Worthington National Bank that BANF acquired late last year. Though the yield is among the smallest on this list, the blowout share appreciation of BancFirst makes this top banking stock worth a look.
Dividend yield (TTM): 1.4%
Bank of America Corp. (BAC)
Bank of America is one of the “Big Four” banks in the U.S., with operations valued at nearly $280 billion and annual revenue that will top $100 billion in 2023. It serves roughly 67 million consumer and business clients through some 4,200 physical locations and about 16,000 ATMs. In the wake of strong earnings in July, Wall Street analysts have been bullish on BAC with RBC, Credit Suisse, Barclays, Wells Fargo and Morgan Stanley all rating this megabank a buy or equivalent. While the stock has underperformed since January, it is up nearly 20% from its summer lows and is showing strong momentum as we race to the end of the year.
Dividend yield (TTM): 3.2%
CVB Financial Corp. (CVBF)
Californians will recognize the roughly $4 billion CVB from its consumer-facing brand, Citizens Business Bank. It operates about 60 banking centers, mostly in the Los Angeles and San Diego areas. The firm provides banking and financial services to small-to-midsized businesses as well as individuals. Its CitizensTrust division also provides fiduciary services, mutual funds, annuities, 401(k) plans and individual investment accounts. Shares of CVBF have been on an uptrend in 2022, tacking on more than 20% thanks to improving business conditions along with rising rates.
Dividend yield (TTM): 2.8%
Itaú Unibanco Holding SA (ITUB)
An international bank worth a look, ITUB is a major bank headquartered in Brazil. Despite the exotic locale, its operations are familiar as it offers business and consumer banking services in the region, including basic savings accounts and credit cards to business services, mortgage lending and investment management. It’s also no small fry, either, with a market capitalization of about $50 billion that makes it larger than big U.S. names like Capital One Financial Corp. (COF) or other foreign giants like London’s Lloyds Banking Group PLC (LYG. Brazil’s economy is back on track after some local political challenges and the overhang of the pandemic, with GDP growing at a faster-than-expected rate and many stocks in the region rallying strongly. This local bank is a key part of that growth, and has been recovering in kind with a surge of about 35% for shares since Jan. 1. The company also boasts a cheap share price despite its large market cap, and was recently named one of US News’ top cheap dividend stocks under $10.
Dividend yield (TTM): 1.9%
Fifth Third Bancorp (FITB)
At $23 billion in market value, FITB is not quite big enough to make the top tier of publicly traded banks, but it’s pretty darn close. Besides, low-risk investors may be drawn to the fact that this more modest bank isn’t involved in more volatile business lines like investment banking or proprietary trading. Roughly half of FITB’s income comes from traditional commercial banking operations instead. Furthermore, the reliable business of Fifth Third lends itself to reliable dividends that are more than twice the S&P 500 average at present and which have nearly doubled from 16 cents per quarter in 2018 to 30 cents now.
Dividend yield (TTM): 3.6%
JPMorgan Chase & Co. (JPM)
Megabank JPMorgan offers stability and scale that’s unmatched by other financial stocks. It’s the largest U.S. bank by assets, commanding about $3 trillion, with a legacy of success that traces back to 1799. During the mortgage meltdown of 2008 and 2009, JPMorgan was known as the best-run bank under CEO Jamie Dimon and made shrewd fire-sale purchases of Washington Mutual and Bear Stearns that helped shore up the global financial system but also positioned JPM for future success. The bank has admittedly underperformed for much of 2022 so far, but with a $350 billion market value and unrivaled global scale, the bank certainly isn’t going anywhere.
Dividend (TTM): 3.5%
M&T Bank Corp. (MTB)
On the surface, M&T seemed to be running into some headwinds after its second-quarter results last month. Some lending was still being held back by pandemic-related disruptions, and it had lagged some of its peers. However, shares really took off around mid-July in part because of a bargain valuation and the growing notion that brighter days are sure to be ahead. Specifically, MTB stock has added about 3.4% in the last 30 days, and is now up an impressive 20% for the year despite challenges for many other stocks on Wall Street. M&T has almost 700 locations from West Virginia to Connecticut to Washington, D.C., and is one of the larger and more entrenched regional banks out there.
Dividend yield (TTM): 2.7%
Mr. Cooper Group Inc. (COOP)
The mortgage lender with the strangely informal name, Mr. Cooper may not strike you as a dynamic kind of company. But the share price tells a different story. COOP shares have more than doubled in the last 24 months. That’s in part because of a hot housing market and Mr. Cooper’s scale as one of the largest mortgage loan-servicing companies in the country. It’s also because of optimism around a digital transformation where COOP is partnering with Sagent, an ambitious software company that services banks and lenders. The deal will integrate Mr. Cooper’s platform into a cloud-native core and license the resulting cloud-based servicing platform to other servicers in the industry. Shares have been soaring lately as a result, so while this financial stock isn’t a traditional bank and doesn’t pay a dividend like others on this list, it’s still worth a look.
Dividend yield: None.
SVB Financial Group (SIVB)
SVB raised its revenue outlook for 2022 after strong earnings in the first quarter, marking its fifth consecutive quarter of better-than-expected guidance. That makes this stock worth a look because it shows this is a financial firm on the way up. SVB is unique in that its acronym stands for Silicon Valley Bank and it specializes in growth investments and venture funding instead of traditional checking accounts. Right now the firm has some $220 billion in assets, and administers almost $400 billion in client funds. While it declined as the broader tech sector and IPO scene hit rough seas in 2022, the specialization of this financial firm, coupled with the chance of a better environment in the years ahead, could spell bargain buying in SIVB stock.
Dividend yield: None.
10 of the best bank stocks to buy for 2022:
— American Express Co. (AXP)
— BancFirst Corp. (BANF)
— Bank of America Corp. (BAC)
— CVB Financial Corp. (CVBF)
— Itaú Unibanco Holding SA (ITUB)
— Fifth Third Bancorp (FITB)
— JPMorgan Chase & Co. (JPM)
— M&T Bank Corp. (MTB)
— Mr. Cooper Group Inc. (COOP)
— SVB Financial Group (SIVB)
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