Some stock market participants are on pins and needles as interest rates have edged higher. While a huge increase would be dangerous for some sectors, the reality is the Federal Reserve will probably not raise interest rates much for another year or even two. Plus, note that while rates have come up from generational lows, the benchmark 10-year Treasury bond still has a lower yield than the S&P 500. At a 1.39% handle, that shouldn’t crimp corporate or retail borrowing activity.
The banking industry loves rising interest rates, as interest rates and bank profitability are connected, with banks benefiting from higher rates. When interest rates are higher, banks make more money, by taking advantage of the difference between the interest banks pay to customers and the interest the bank can earn by investing the deposits.
We screened our 24/7 Wall St. research database looking for banks stocks rated Buy that also pay solid and dependable dividends. When you combine the positive of rising interest rates and an opening and improving economy, the banking industry could be poised for some outsized total return. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Bank of America
This bank posted solid fourth-quarter results. Bank of America Corp. (NYSE: BAC) is a ubiquitous presence in the United States, providing various banking and financial products and services for individual consumers, small and middle-market businesses, institutional investors, corporations and governments in the United States and internationally. It operates 5,100 banking centers, 16,300 ATMs, call centers and online and mobile banking platforms.
The bank has expanded into a number of new U.S. markets, with scale across the country positioning it ideally to benefit from accelerating loan growth over the next two years. Moreover, unlike smaller peers, scale allows the bank to increase investment substantially over the next few years without notably jeopardizing returns, driving further market share gains.
Shareholders receive a 1.98% dividend. Atlantic Equities has a $40 price target for the shares, while the Wall Street consensus target is $36.33. Bank of America stock closed on Wednesday at $36.38 per share.
Shares of this top bank have rallied well off the 2020 lows and look poised to move higher in the rest of 2021. Citigroup Inc. (NYSE: C) is a leading global diversified financial service company that provides consumers, corporations, governments a broad range of financial products and services.
Citigroup offers services such as consumer banking and credit, corporate and investment banking, securities brokerage, transaction services and wealth management. It operates and does business in more than 160 countries and jurisdictions.
Trading at a still very cheap 9.9 times estimated 2021 earnings, this stock looks very reasonable in what remains a volatile stock market and in a sector that has lagged dramatically.
Investors receive a 3.06% dividend. The D.A. Davidson price target is $84, and the target is $79.08. Citigroup stock closed at $68.60 on Wednesday.