Banking & Finance

Banks Are Dirt Cheap: 5 Analyst Top Picks for the Rest of 2020

For old-timers, the action in the FAANG stocks is reminiscent of the dot-com bull market and implosion of 1999 and 2000. However, this is not really the case this time. While tech is expensive, the top companies leading the charge make money. One sector that is very inexpensive now is the financials. Many banks are trading at an incredibly cheap one times book value.

Low interest rates, tightening credit standards and a host of other issues have clouded the sector, and with Wall Street anticipating bankruptcy filings in both energy and retail, investors have fled the sector. The Jefferies team has zeroed in on five top stocks that are incredible values now, and with bank earnings for the big money center players coming this week, it may be time to jump in.

The firm noted this in its report:

We anticipate that results for the second quarter of 20 will be messy, but believe that most have been well-articulated in advance. Balance sheets will be meaningfully inflated, Net interest margin will be pummeled, and provision expense will be eye-popping again. Looking ahead, while we expect second quarter pre-provision net revs. (PPNR) to look good, forward pressures from lower rates and a likely slowdown of activity are likely to weigh going forward. On credit, we see elevated provisioning due to the uncertain economic outlook.

Here are the five top pick banks stocks to Buy now at Jefferies.  It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision. 

Citigroup

Shares of this top bank are trading at the lowest levels since 2018. 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 8.4 times estimated 2021 earnings, this one looks very reasonable in what remains a volatile stock market. That noted, the company posted solid second-quarter results, beating on both the top and bottom lines, this Tuesday morning, and the shares traded higher in premarket action.

Investors receive a 3.85% dividend. The Jefferies price target for the shares is $60, while the Wall Street consensus price objective is $69.29. Citigroup stock closed trading on Monday at $52.20.

KeyCorp

This is another top bank that makes good sense for investors for the rest of 2020. 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

Investors receive a monster 6.36% dividend, which the bank already has said will remain intact for the third quarter. Jefferies has a $13 target price, but the consensus price target is $13.45. KeyCorp stock closed Monday at $11.76, up over 5% on the day.