Banking & Finance

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

Truist Financial

This off-the-radar company makes great sense for investors looking for a solid regional winner. Truist Financial Corp. (NYSE: TFC) is a bank holding company, incorporated in North Carolina and headquartered in Charlotte. The company was formerly known as BB&T, but it changed its name in December 2019 upon the acquisition of SunTrust Banks.

The transition to the Truist brand will take about two years. Until then, customers of both BB&T and SunTrust will be served through their respective bank branches using the same apps, websites and services as before the merger closed.

As part of the regulatory approval process, the new company will sell off 30 SunTrust branches in North Carolina, Virginia and Georgia to First Horizon Bank and divest $2.4 billion in deposits to “mitigate the competitive effects of the merger,” according to the Federal Reserve.

Truist’s footprint is located in one of the strongest and fastest-growing regions of the United States, and the analysts expect the company to maintain a competitive advantage over many of its competitors headquartered outside its footprint due to its being physically located in the southeast part of the country.

Investors receive a 5.05% dividend. The $40 Jefferies target compares with the $43.10 consensus figure. Truist Financial stock ended Monday at $35.61 per share.

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.

Jefferies has set a $119 price target. The consensus price objective is $125.79, and Signature Bank stock closed trading at $105.74 on Monday.

Western Alliance Bancorp

This is another off-the-radar bank, based in Phoenix, that looks poised for a strong second half of 2020. Western Alliance Bancorp (NYSE: WAL) is a bank holding company engaged in the provision of deposit, lending, treasury management, international banking and online banking products and services for businesses.

Earnings projections for Western Alliance Bancorp’s second quarter ending June 30, 2020, and the full-year expectations for 2020 and 2021 have been adjusted. The second-quarter earnings estimate has been raised to $0.79 per share from the previous consensus forecast of $0.73. The full-year estimate for 2020 has been raised to $3.58 per share from $3.42. In contrast, the full year 2021 estimate has been reduced from $4.47 per share to $4.29.

Shareholders receive a 2.48% dividend. The Jefferies price objective is $42. The consensus target price is $40.29, and the last trade for Western Alliance Bancorp stock hit the tape at $35.15 on Monday.

The analysts only have one major money center bank to go along with four targeted regional plays, all of which are in high-growth areas of the United States. It should be noted that this remains a contrarian play, and with earnings for banks starting Tuesday, things could get volatile, but the early results look promising.