Benzinga - by Piero Cingari, Benzinga Staff Writer.
The possibility of a soft landing for the U.S. economy is gaining traction, prompting an increased interest in U.S. banking stocks, as Bank of America revealed in a note to clients on Thursday.
The group of Bank of America’s equity analysts, led by Ebrahim H. Poonawala, point out several key factors that might fuel a bullish trend in banking stocks this year. This optimism is rooted in the changing economic landscape, expected policy shifts and the strategic positioning of individual banks.
“We see potential for an overshoot in bank stocks,” analysts wrote in the note.
“Increasing confidence that interest rates headed lower, economy avoiding a recession, and GDP accelerating in the second half of the year should see a continued re-rating higher in stocks,” they added.
The market reaction was positive following the note. The Financial Select Sector SPDR Fund (NYSE:XLF) increased by 1% on Thursday, reaching highs not seen since late April 2022. Similarly, the SPDR S&P Regional Banking ETF (NYSE:KRE) rallied by 1%, and rose 35% since late October 2023.
Chart: US Bank Stocks Jump To 20-Month Highs
Key Factors Potentially Leading To Bank Stocks’ Bull Market In 2024
Bank of America’s Top Bank Picks For 2024
| New York Community Bancorp, Inc. (NYSE:NYCB) | Buy | 27% | $13.00 |
| KeyCorp (NYSE:KEY) | Buy | 26% | $18.00 |
| Truist Financial Corporation (NYSE:TFC) | Buy | 17% | $43.00 |
| East West Bancorp, Inc. (NASDAQ:EWBC) | Buy | 15% | $82.00 |
| M&T Bank Corporation (NYSE:MTB) | Buy | 15% | $157.00 |
| U.S. Bancorp (NYSE:USB) | Buy | 14% | $49.00 |
| First Bancorp (NYSE:FBP) | Buy | 14% | $18.50 |
| First Horizon Corporation (NYSE:FHN) | Buy | 13% | $16.00 |
| Western Alliance Bancorporation (NYSE:WAL) | Buy | 12% | $70.00 |
| Citigroup Inc. (NYSE:C) | Buy | 12% | $60.00 |
| Cullen/Frost Bankers, Inc. (NYSE:CFR) | Buy | 12% | $119.00 |
| The Bank of New York Mellon Corporation (NYSE:BK) | Buy | 11% | $58.00 |
| Fifth Third Bancorp (NASDAQ:FITB) | Buy | 11% | $38.00 |
| Wells Fargo & Company (NYSE:WFC) | Buy | 11% | $54.00 |
| Northern Trust Corporation (NASDAQ:NTRS) | Buy | 11% | $92.00 |
| JPMorgan Chase & Co. (NYSE:JPM) | Buy | 10% | $188.00 |
| Synovus Financial Corp. (NYSE:SNV) | Buy | 10% | $40.00 |
| Morgan Stanley (NYSE:MS) | Buy | 8% | $100.00 |
| Goldman Sachs Group Inc. (NYSE:GS) | Buy | 8% | $412.00 |
Bank of America has upgraded Truist Financial Corporation to Buy on a strong balance sheet, expense flexibility, capital optionality and above all a sharpened focus within management on “righting the ship.”
Other top picks among regional banks are:
- US Bancorp: The bank’s deal-driven synergies and its distinct payments business make it a favorable pick.
- KeyCorp: Expected to experience significant margin expansion and benefit from a rebound in investment banking.
- East West: Lower rates could mitigate perceived commercial real estate risks, shifting the focus to its above-average growth potential and top-tier ROA/ROTCE.
- Western Alliance: Seen as highly leveraged to benefit from rate cuts, especially in funding and mortgage areas.
Photo: Shutterstock
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.