The third-quarter earnings-reporting season got off to a very solid start on Friday, as four leading mega-cap money center banks posted stellar results. Citigroup, JPMorgan Chase, Wells Fargo and PNC Financial all came in with earnings results that were highlighted by better-than-expected revenues. The positive results could bode well for others in a sector that has struggled this year. (See how the mega banks have fared since the financial crisis.)
Due to the implosion and failure of Silicon Valley Bank and others earlier this year, investors (especially institutional accounts) did what investors often do. They shot first and asked questions later, fearing a wide contagion in the banking industry. While there is still a wary eye on Wall Street toward many of the top banks, even those with larger market capitalizations, the reality is there could be some huge total-return winners to grab before they report. (These are the biggest financial frauds and scandals of the 21st century.)
Six top companies hit our 24/7 Wall St. financial services database screens. They all offer oversized dividends, have Buy-ratings on Wall Street and will report earnings later this week.
It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Ally Financial
The bank with no buildings may be poised to have a strong second half of 2023. Ally Financial Inc. (NYSE: ALLY) is a digital financial services company that provides various digital financial products and services to consumer, commercial and corporate customers primarily in the United States and Canada. It was formerly known as GMAC and changed its name in May 2010.
Its Automotive Finance Operations segment offers automotive financing services. These include providing retail installment sales contracts, loans and operating leases, term loans to dealers, financing dealer floor plans and other lines of credit to dealers, warehouse lines to automotive retailers and fleet financing. It also provides financing services to companies and municipalities for the purchase or lease of vehicles and vehicle-remarketing services.
The Insurance Operations segment offers consumer finance protection and insurance products through the automotive dealer channel and commercial insurance products directly to dealers. This segment provides vehicle service and maintenance contracts and guaranteed asset protection products. Furthermore, it underwrites commercial insurance coverages, which primarily insure dealers’ vehicle inventory.
The Mortgage Finance Operations segment manages consumer mortgage loan portfolio that includes bulk purchases of jumbo and low-to-moderate income mortgage loans originated by third parties. It also includes direct-to-consumer mortgage offerings.
The Corporate Finance Operations segment provides senior secured leveraged cash flow and asset-based loans to middle market companies, leveraged loans and commercial real estate products to serve companies in the health care industry. The company also offers commercial banking products and services. In addition, it provides securities brokerage and investment advisory services.
The bank is scheduled to share its latest quarterly results on October 18.
Investors receive a 4.88% dividend. Citigroup has a $35 target price on Ally Financial stock. The consensus target is $31.89, and the stock closed on Friday at $24.58 a share.
Bank of America
The company is expected to post results on October 17. Bank of America Corp. (NYSE: BAC) is a ubiquitous presence in the United States. It provides 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. Its scale across the country positions 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.
Note that Warren Buffett owns a stunning 1 billion shares of this bank.
Shareholders receive a 3.59% dividend. Oppenheimer’s $48 target price is well above the $33.96 consensus price target for Bank of America stock. The closing share price on Friday was $26.76.
KeyCorp
Shares of this top regional player are quite cheap at current levels for investors looking at financials. 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.
KeyCorp also provides a broad range of sophisticated corporate and investment banking products. These include 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.
Look for this bank to share its results on October 19.
KeyCorp stock comes with a 7.84% dividend. The Piper Sandler price target is $17. The consensus target is lower at $12.68, and the shares closed at $10.46 on Friday.
Regions Financial
This stock does a ton of business in the fast-growing southern and southeastern parts of the country. Regions Financial Corp. (NYSE: RF) provides banking and bank-related services to individual and corporate customers. It operates through three segments.
The Corporate Bank segment offers commercial banking services, such as commercial and industrial, commercial real estate and investor real estate lending; equipment lease financing; deposit products; and securities underwriting and placement, loan syndication and placement, foreign exchange, derivatives, merger and acquisition, and other advisory services. It serves corporate, middle market and commercial real estate developers and investors.
The Consumer Bank segment provides consumer banking products and services related to residential first mortgages, home equity lines and loans, branch small business and indirect loans, consumer credit cards and other consumer loans, as well as deposits.
The Wealth Management segment offers credit-related products and retirement and savings solutions, as well as trust and investment management, asset management and estate planning services to individuals, businesses, governmental institutions and nonprofit entities. It also provides investment and insurance products, low-income housing tax credit corporate fund syndication services and other specialty financing services.
The bank is expected to post its results on October 20.
The dividend yield is 5.99%. Morgan Stanley’s $26 target price compares with the $20.78 consensus target, and Regions Financial stock ended Friday at $16.03 a share.
Truist Financial
This company was created through a merger of SunTrust Bank and BB&T in 2019, and it also does much of its business in the south and southeast. Truist Financial Corp. (NYSE: TFC) provides banking and trust services in the southeastern and mid-Atlantic United States. Its deposit products include non-interest-bearing checking, interest-bearing checking, savings and money market deposit accounts, as well as certificates of deposit and individual retirement accounts.
The company also provides funding; asset management; automobile lending; bankcard lending; consumer finance; home equity and mortgage lending; insurance, such as property and casualty, life, health, employee benefits, workers compensation and professional liability, surety coverage, title, and other insurance products; investment brokerage; mobile/online banking; and payment, lease financing, small business lending, and wealth management/private banking services.
In addition, Truist offers association, capital market, institutional trust, insurance premium and commercial finance, international banking, leasing, merchant, commercial deposit and treasury, government finance, commercial middle market lending, small business and student lending, floor plan and commercial mortgage lending, mortgage warehouse lending, private equity investment, real estate lending and supply chain financing services. It provides corporate and investment banking, retail and wholesale brokerage, securities underwriting and investment advisory services.
October 19 is Truist’s scheduled report date.
Truist Financial stock investors receive a 7.32% dividend. The $34 Raymond James price target is shy of the consensus target of $34.27. The stock closed on Friday at $28.41.
U.S. Bancorp
This top super-regional bank is among the higher-paying dividend bank stocks. U.S. Bancorp (NYSE: USB) provides various financial services to individuals, businesses, institutional organizations, governmental entities and other financial institutions in the United States.
The company’s depository services include checking accounts, savings accounts and time certificate contracts. It offers lending services, such as traditional credit products. And it provides credit card services, lease financing and import/export trade, asset-backed lending, agricultural finance and other products. It also provides ancillary services. These include capital markets, treasury management and receivable lock-box collection services to corporate customers. It offers a range of asset management and fiduciary services for individuals, estates, foundations, business corporations and charitable organizations.
In addition, U.S. Bancorp offers investment and insurance products to its customers principally within its markets, as well as fund administration services to a range of mutual and other funds. The company also provides corporate and purchasing card and corporate trust services, and merchant processing services. And it offers cash and investment management, ATM processing, mortgage banking and brokerage and leasing services.
Check out its earnings on October 18.
Shareholders receive a 5.97% dividend. The BofA Securities target price is $40. The consensus target is $41.31. Friday’s closing share price was $32.17.
24/7 Wall St.Note that some of these banks may have to trim their dividends. Yet, because the stocks have imploded this year due to panic selling, even with a cut, they will still be well above the payouts of most companies. With earnings reports scheduled for this week, some solid prints and positive forward guidance could launch the stocks considerably higher, after languishing for most of 2023.
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