Jefferies Very Bullish on Banks: 4 to Buy for the Rest of 2018

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KeyCorp

This is one midcap bank pick that makes good sense for 2018. KeyCorp (NYSE: KEY) operates as the bank holding company for KeyBank National Association, which provides deposit, lending, cash management and investment services to individuals, small and medium-sized businesses.

The company also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets banner.

The top managers are attracted to the larger regional banks, as valuations look very reasonable and cost-saving plans are helping to make forward estimates look very achievable. With overall credit remaining solid, earnings and loan deposit and fee growth all are positive metrics for the bank.

KeyCorp earnings for the first quarter came to $0.38 per share, more than in the same period of the year prior. While it didn’t beat Wall Street’s earnings estimates for the quarter, it did match it. Reported revenue for the quarter totaled $1.55 billion. While it was better than the revenue for the same period last year, it just missed the analysts’ forecast for the period.

Investors in KeyCorp are paid a 2.07% dividend. The $25 price target at Jefferies compares to a consensus target of $23.29. The shares were last seen trading at $20.41 apiece.

Signature Bank

This regional bank has a leading presence in New York City and is a Wall Street favorite. 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.

Net income for the 2018 first quarter rose year over year to $34.5 million, or $0.63 diluted earnings per share. Excluding write-downs and fair value adjustments for the taxi medallion portfolio, net income would have been a record $146.8 million, or $2.69 per share.

Jefferies has a whopping $178 price target. The consensus price objective is $163.20, and the shares closed trading at $130.22 on Friday.

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Shares of these four top banks have dropped significantly in price from levels posted earlier this year, and all are offering solid entry points for investors looking to add shares. With first-quarter earnings out of the way, and some smooth sailing ahead for the sector, they all make good sense for long-term growth accounts now.