Banking & Finance

Top Analyst Says Big Upside Left in Banks: 4 to Buy for 2018


This top bank has broken out of a long trading range and could push even higher. Citigroup Inc. (NYSE: C) has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. It provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services and wealth management.

Trading at a still very cheap 10 times estimated 2018 earnings, the bank looks very reasonable in what has become a pricey stock market. A continuing stock buyback program is a big positive. The company’s institutional clients group appears to be holding its ground last quarter, and while guidance when it released the quarter in January was conservative and somewhat disappointing, it’s cheap at this level.

The company reported better-than-expected quarterly numbers, as its global consumer business showed further revenue growth.

Citigroup investors are paid a 1.67% dividend. The $80 Merrill Lynch price target compares with the posted consensus price objective of $76.64. The stock was trading Thursday at $74.60.

Signature Bank

This regional bank has a leading presence in New York City and is a member of the Merrill Lynch US 1 list. Signature Bank (NASDAQ: SBNY) is a full-service commercial bank with 29 private client offices throughout the New York metropolitan area. The bank’s growing network of private client banking teams serves the needs of privately owned businesses, their owners and senior managers.

Signature Bank also offers a wide variety of business and personal banking products and services. Its specialty finance subsidiary, Signature Financial, provides equipment finance and leasing as well as transportation and taxi medallion financing. Signature Securities Group, a wholly owned subsidiary, is a licensed broker-dealer, investment adviser and member FINRA/SIPC, offering investment, brokerage, asset management and insurance products and services.

The Merrill Lynch price target is a whopping $165. That compares with the consensus price objective of $145.95 and the recent share price of $136.15.

Two top new money plays for 2018 with good upside and two additional picks for investors looking for additional banks to consider. Any way you look at it, the sector, while not overly expensive on a valuation basis, is stretched, with many trading near the assigned price targets. It may make sense to buy partial positions and see if we don’t get a pullback.

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