Back to top

Image: Bigstock

Positive Vaccine Data Propels Bank Stocks: 5 Top-Ranked Picks

Read MoreHide Full Article

Since the beginning of last week, there has been a sense of optimism among the investors as the coronavirus vaccine hope added to Joe Biden winning the U.S. Presidential election.

Yesterday, Moderna, Inc. (MRNA - Free Report) became the second company to reveal positive data related to the vaccine it is developing. The Phase 3 study of mRNA-1273, the company’s vaccine candidate against coronavirus, disclosed vaccine efficacy of 94.5%. This comes close on the heels of a similar disclosure early last week that the vaccine being jointly developed by Pfizer Inc. (PFE - Free Report) and BioNTech SE has been found to be more than 90% effective in preventing coronavirus infections.

Thus, despite a spike in coronavirus cases across the United States, investors seem to be bullish on the latest developments. Since the announcement of favorable vaccine data on Nov 9, all three major indexes – the S&P 500, Dow Jones and Nasdaq – are up 3.3%, 5.7% and 0.2%, respectively.

Further, the S&P 500 Financials sector (which had been underperforming the markets till now) has been among one of the best performers, rallying 10.7% over the last six trading days. Likewise, SPDR S&P Regional Banking ETF and KBW Nasdaq Bank Index have jumped 18.9% and 15.3%, respectively, over the same time frame.

Why are Bank Stocks Rallying?

Banks have been among the worst performers since the coronavirus outbreak in March and resultant economic slowdown as the pandemic impeded business activities across the globe. This, along with low interest rates, (the Federal Reserve cut the rates to near-zero in mid-March to support the U.S. economy) has been weighing significantly on the bank stocks.  

Hence, the positive developments related to coronavirus vaccine are being seen as harbingers of restoration of near-normal activities. Further, this indicates that there is a high chance that other vaccine developers like AstraZeneca, Johnson & Johnson and Novavax could find favorable results too.

If these happen, economic recovery is likely to speed up and the chances of banks facing high level of delinquent loans will lessen. This will also lower loan-loss uncertainty, which had led banks to build billions of dollars of pandemic-related reserves.

Further, as the economy revives, demand for loan (which is faltering of late due to less appetite among businesses to grow) should increase. Thus, this will aid banks’ net interest income (primary source of revenues) and net interest margin despite low rate environment.

Moreover, several banks had voluntarily/involuntarily suspended share repurchases and even cut dividends to conserve liquidity. Thus, with the economic recovery, banks’ capital deployment actions are expected to return to pre-crisis level. This will, in turn enhance shareholder value.

Choosing Bank Stocks Worth Betting on

Though the vaccine-related developments are good news, banks are not expected to be out of woods just yet. Distribution of the vaccine to those who immediately need it and to the larger population will take time.

Nevertheless, the latest medical breakthroughs can be seen as a big positive for the hard-hit banking sector. So, one must keep close a watch on fundamentally strong banks and make wise investment decisions to generate attractive returns in the future.

Below we present five bank stocks that have rallied more than 5% since first positive vaccine data came in and have market capitalization of $1 billion or more. Also, these banks currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Headquartered in Dallas, TX, shares of Triumph Bancorp, Inc. (TBK - Free Report) have rallied 17.4% since Nov 6. It provides banking and commercial finance products and services to retail customers and small-to-mid-sized businesses. The company has a market cap of $1.2 billion.

Over the past month, the company’s earnings estimates for 2020 have jumped 71.3%. Further, over the next two years, the company’s earnings are expected to rise 15.2%.

First Financial Bankshares, Inc. (FFIN - Free Report) , based in Abilene, TX, provides commercial banking products and services. The company’s shares have rallied 12.6% over the past six trading sessions.

It has a market cap of $4.9 billion. Over the past 30 days, the Zacks Consensus Estimate for its current-year earnings have risen 3%. Additionally, the company’s earnings are projected to grow 15.4% over the next two years.

Headquartered in Troy, MI, shares of Flagstar Bancorp, Inc. (FBC - Free Report) have gained 9.4% over the past six trading days. As a savings and loan company, it provides commercial and consumer banking services. The bank has a market cap of $1.8 billion.

Over the past month, the company’s earnings estimates for 2020 have moved marginally north. Further, the company’s earnings are projected to grow 65.7% over the next two years.

Investors Bancorp, Inc. (ISBC - Free Report) , headquartered in Short Hills, NJ, offers various banking products and services. The company’s shares have gained 17.3% over the past six trading sessions.

It has a market cap of $2.4 billion. Over the past 30 days, its current-year earnings estimates have been revised 12% upward. Also, over the next two years, the company’s earnings are projected to increase 23.8%.

Shares of Meta Financial Group, Inc. (CASH - Free Report) have soared 18.1% since Nov 6. It provides various banking products and services, and also issues prepaid cards and consumer credit products. Based in Sioux Falls, SD, it has a market cap of $1.2 billion.

Over the past 30 days, the company’s earnings estimates for 2020 have moved 13.4% north. Further, the company’s earnings are projected to grow 69.7% over the next two years.

Legal Marijuana: An Investor’s Dream

Imagine getting in early on a young industry primed to skyrocket from $17.7 billion in 2019 to an expected $73.6 billion by 2027.  

Although marijuana stocks did better as the pandemic took hold than the market as a whole, they’ve been pushed down. This is exactly the right time to get in on selected strong companies at a fraction of their value before COVID struck. Zacks’ Special Report, Marijuana Moneymakers, reveals 10 exciting tickers for urgent consideration.

Download Marijuana Moneymakers FREE >>