They assured us after the failure of Silicon Valley Bank, First Republic and Signature Bank that all was well, that the banking system was totally secure and in no danger of further failures. While we have only seen two failures since then, Moody’s got way out in front of potential trouble that could be on the way by cutting the rating on 10 small and midsized banks, including M&T Bank. It also placed industry giants like Bank of New York Mellon, U.S. Bancorp and State Street, among others, on negative reviews.
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Of course, the stock market did not take the downgrade and negative reviews lightly. The market was hammered on Tuesday as concerns of a contagion spreading throughout the financial system were front and center once again. Moody’s also feels that a recession is on the way later this year or early in 2024, and that could crimp earnings for many banks as most are tightening lending and credit standards.
We screened our 24/7 Wall St. financial sector research database looking for the top banks that were not a part of the Moody’s downgrade and negative review free-for-all. The logical winners happened to be the big money center giants that have the most assets and income-producing ability to survive a downturn. These five are rated Buy across Wall Street, posted stellar second-quarter results and pay dependable dividends.
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
Warren Buffett owns a billion shares of this bank. 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.
Bank of America has expanded into several 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 3.07% dividend. Oppenheimer’s $47 target price for Bank of America stock compares with a $35.81 consensus target and Tuesday’s closing share price of $31.27.
Citigroup
This top bank has rallied nicely off the lows and Buffett bought $2.5 billion worth of stock back in the summer of 2022. Citigroup Inc. (NYSE: C) is a leading global diversified financial service company that provides consumers, corporations and 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. And it operates and does business in more than 160 countries and jurisdictions in North America, Latin America, Asia and elsewhere.
Trading at a still cheap 7.6 times estimated 2023 earnings, Citigroup looks very reasonable in what remains a volatile stock market and in a sector that has dramatically lagged.
Investors receive a 4.56% dividend. The $78 Oppenheimer price target is a Wall Street high. Citigroup stock has a consensus target of $55.72, and the shares ended Tuesday trading at $45.16.
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JPMorgan
This stock trades at a still reasonable 10.7 times estimated 2023 earnings. JPMorgan Chase & Co. (NYSE: JPM) is a leading global financial services firm and one of the largest banking institutions in the United States, with about $2.6 trillion in assets.
The company as it is today was formed through the merger of retail bank Chase Manhattan and investment bank J.P. Morgan. The firm has many operating divisions, including investment and corporate banking, asset management, retail financial services, commercial banking, credit cards and financial transaction services.
Top analysts are very positive on the stock, largely because the industry titan faces a continued broad recovery in nearly every aspect of its business:
- Its leading M&A advisory and capital markets product set and market share.
- The massive footprint of corporate and commercial banking customers.
- Its sizable wholesale payments businesses.
The company has proven that it has the wherewithal to continually invest in people, products and platforms to further its market share base, extending its competitive advantage versus most peers.
JPMorgan Chase stock comes with a 2.57% dividend. Oppenheimer has a $186 price objective, and the consensus target is $158.37. The shares closed on Tuesday at $155.88.
24/7 Wall St.PNC Financial Services
This bank has a huge client base and has expanded in a big way over the past decade, and it is among the top 10 largest U.S. banks by assets. PNC Financial Services Group Inc. (NYSE: PNC) operates as a diversified financial services company in the United States through the following three segments.
The Retail Banking segment offers checking, savings and money market accounts, as well as certificates of deposit. It offers residential mortgages, home equity loans and lines of credit, auto loans, credit cards, education loans, and personal and small business loans and lines of credit, as well as brokerage, insurance and investment and cash management services. This segment serves consumer and small business customers through a network of branches, ATMs, call centers and online and mobile banking channels.
The Corporate & Institutional Banking segment provides secured and unsecured loans, letters of credit and equipment leases, as well as cash and investment management services, receivables and disbursement management services, funds transfer services, international payment services and access to online/mobile information management and reporting. it offers securities underwriting, loan syndications, customer-related trading and mergers and acquisitions and equity capital markets advisory related services, and also commercial loan servicing and technology solutions. It serves midsized and large corporations and government and not-for-profit entities.
Its Asset Management Group segment offers investment and retirement planning, customized investment management, credit and cash management solutions and trust management and administration services for high net worth and ultra-high net worth individuals, and their families, as well as multi-generational family planning services for ultra-high net worth individuals and their families. It also provides outsourced chief investment officer, custody, private real estate, cash and fixed-income client solutions, and fiduciary retirement advisory services for institutional clients.
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The dividend yield here is 4.57%. The Barclays target price is $167, while the consensus target is lower at $141.90. PNC Financial Services stock closed on Tuesday at $130.05.
Wells Fargo
This large-cap bank is perhaps the best solid value play for 2023, and it also benefits from higher net interest income. Wells Fargo & Co. (NYSE: WFC) is a diversified financial services company that provides banking, investment, mortgage and consumer and commercial finance products and services in the United States and internationally.
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