Which of these 18 US bank stocks offers investors both security and value?


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What are we looking for?

US banks recently released quarterly earnings and there is a general theme of good performance, with many names passing stress tests with flying colors as pandemic restrictions loosen. There have even been dividend increases and share buybacks.

Banks are known to have some of our favorite investment qualities. As a result, my team member Allan Meyer and I thought we would take a closer look at the US sector using our investment philosophy based on safety and value.

Screen

We started our research by looking at the banking industry in the S&P 500 Index. Next, we looked at market capitalization as a safety factor; large companies tend to have more stable and diversified sources of revenue. The list is sorted on this point, from largest to smallest. The dividend yield is the projected annualized dividend divided by the recent stock price. Dividends can reflect more secure and stable earnings profiles, and Allan and I like to be paid while waiting for capital appreciation. The debt-to-equity ratio is our last safety measure; it is the total outstanding debt divided by equity. A smaller number indicates lower debt or indebtedness levels. And as we like to say, it’s hard to go bankrupt if you have little or no debt.

The price / earnings (P / E) ratio is the recent stock price divided by the projected earnings per share. It is an evaluation measure; the lower the number, the better the value. Profit dynamics is the change in annualized profits during the last quarter. A positive number implies that income increases while the reverse is true for a negative number. Long-term positive earnings dynamics should translate into gains in stock prices and possibly higher dividends. Book price (P / B) compares recent stock price with book value or net value per share. This is another evaluation measure; a lower number is preferred. ROE is a profitability ratio (net income divided by shareholders’ equity); a higher number is better.

We also calculated the mean and median of all measurements to allow for better comparability and provided the total return over 52 weeks to track performance.

What we found

Leveraging Safety and Value to Strengthen the U.S. Industry

Society Teleprinter Recent price (US $) Mkt. Cap. (Mil. USD) Div. Yld. (%) Debt equity (%) PER Win. Mom. (%) P / B RCP (%) 52W TTL. Rtn. (%)
JPMorgan Chase & Co. JPM-N 156.03 472.3 2.3 194.1 25.2 43.0 1.7 12.0 68.9
Bank of America Corp. BAC-N 41.15 352.6 1.7 165.1 13.3 26.6 1.3 6.8 77.8
Wells Fargo & Co. WFC-N 45.07 186.3 0.9 147.1 12.2 253.7 1.0 1.0 79.3
Citigroup Inc. CN 70.41 145.5 2.9 243.6 8.1 49.6 0.7 5.9 40.8
US Bancorp USB-N 57.57 85.8 2.9 97.6 12.7 23.8 1.7 10.0 62.0
PNC Financial Services PNC-N 192.79 81.9 2.6 62.4 14.4 32.1 1.5 11.8 93.2
Truist Financial Corp. TFC-N 56.03 75.4 3.2 59.4 11.8 9.2 1.1 6.8 58.5
Bank of the First Republic FRC-N 190.55 33.6 0.5 15.1 37.9 10.2 2.6 9.3 81.2
SVB Financial Group SIVB-Q 565.21 30.7 0.0 10.5 20.9 32.7 3.1 16.8 164.8
Fifth Third Bancorp FITB-Q 38.44 27.1 2.8 68.9 11.6 37.9 1.2 6.2 111.4
Huntington Bancshares HBAN-Q 14.35 21.2 4.2 65.7 10.2 64.3 1.1 6.8 71.5
KeyCorp KEY-N 20.72 20.1 3.6 81.7 10.0 38.6 1.1 7.9 81.1
Citizens Financial Group CFG-N 46.05 19.6 3.4 37.8 20.0 60.1 0.9 4.6 99.3
Corp. Financial Regions. RF-N 20.26 19.5 3.1 19.7 9.9 49.5 1.1 6.2 94.7
M&T Bank Corp. MTB-N 145.93 18.8 3.0 27.4 12.2 14.7 1.1 8.7 48.1
Comerica Inc. CMA-N 71.73 10.0 3.8 36.4 11.7 88.4 1.2 6.2 110.2
Zions Bancorporation ZION-Q 53.26 8.7 2.6 36.9 10.9 61.0 1.1 6.6 67.0
People’s United Financial PBCT-Q 17.21 7.4 4.2 20.9 12.7 3.2 1.0 6.7 60.3
Mean 89.8 2.6 77.2 14.8 49.9 1.4 7.8 81.7
Median 28.9 2.9 60.9 12.2 38.2 1.1 6.8 78.6
Source: Refinitiv Eikon & Wickham Investment Counsel Inc.

Huntington Bancshares Inc. and Corp. Financial Regions. score well across the board for safety and value. Truist Financial Corp. looks good but fails to achieve profit momentum. Huntington also offers the highest dividend yield as well as United People’s Financial Inc. SVB Financial Group has the lowest debt levels and has the highest profitability (ROE). Citigroup Inc. is the most attractive from a valuation point of view with the lowest P / E and P / B, but also the most indebted. Wells Fargo & Co. showed the strongest earnings momentum and it should be noted that it recently increased its dividend.

The BMO Equal Weight US Banks Hedged to CAD Index ETF (ZUB) is an option for investors who enjoy the industry but prefer to diversify by avoiding securities and currency risks.

Investors should contact an investment professional or conduct further research before purchasing any of the securities listed here.

Sean Pugliese, CFA, is an investment portfolio manager at Wickham Investment Counsel, helping individuals, families and other investors.

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