RBC Says to 'Get Greedy' and Buy the Top Banks Stocks Now

Banking, finance, and taxes

Published: February 18, 2016 10:50 am

Last Updated: January 13, 2020 1:02 pm

If you are an energy investor, you would have to think there is nothing worse than being in energy stocks. Hold your horses though, as the bank stocks as measured by the Nasdaq Bank Index (BKX) are down a stunning 16.3% since the beginning of the year. Many of the stocks in that index are blue chip leaders that have been absolutely destroyed. In fact, a new RBC research report maintains that bank valuations haven’t been this attractive in five years.

RBC acknowledges the multitude of reasons why banks have been crushed, not the least of which is the fact that the Federal Reserve looks pinned in, and it’s very possible we could have just one, or possibly no, interest rate increase the rest of 2016. That combined with worries of European banks, a weakening Chinese economy and the continuing struggles in the energy sector, all have contributed to the sell-off.

RBC notes that positive factors like loan growth, the healthier U.S. economy, strong credit quality and increased mergers and acquisitions activity, make the buying opportunity even more significant. We screened the RBC bank research universe and found four top banks paying good dividends rated Outperform to buy now.

JPMorgan

This stock trades at a very low 9.65 times estimated 2016 forward earnings. JPMorgan Chase & Co. (NYSE: JPM) is expected to benefit from commercial loan growth and an upturn in capital spending. Wall Street analysts agree that the stock seems attractively valued on estimated price-to-earnings (P/E) ratio and a very solid price-to-book value. Some on Wall Street have cautioned that last year’s divestiture of the physical commodities business could provide an earnings headwind throughout this year.

Improvement in loan growth, terrific equity capital markets and a steady increase in deposits are a solid plus. Trading at a discount to many of the large cap banks on 2015 earnings estimates helps upside potential as well. With $2.6 trillion in assets on a worldwide basis, and one of Wall Street’s savviest leaders in Jamie Dimon, the stock is a solid buy for investors.

Dimon also recently put his money where his mouth was, reportedly buying a stunning 500,000 shares of the stock for a massive $26 million. It brings his total holdings in the bank to 6.7 million shares, worth over $360 million.

JPMorgan investors receive a 3% dividend. The RBC price target for the stock is $72, and the Thomson/First Call consensus price target is $72.22. Shares closed on Wednesday at $58.77.