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3 Bank Stocks Wall Street Analysts Recommend for 2023
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Bank stocks were under pressure for a large part of 2022. Several serious headwinds, including record-high inflation, global supply-chain disruptions and the ongoing Russia-Ukraine conflict, wreaked havoc with the investors’ confidence, leading to bearish sentiments.
The Federal Reserve stepped up its monetary policy with an ultra-aggressive stance to counter the “sticky” inflation. This resulted in the short-term interest rates reaching a 15-year high of 4.50% this year, with the central bank indicating more rate hikes in 2023. As we know, banks thrive in rising rate regimes, but this hawkish stance has increased the chances of economic slowdown and/or recession next year. Even the Fed’s December Summary of Economic Projections suggests that the U.S. economy will be slowing down considerably next year, with just 0.5% growth.
Thus, the new year is going to be a tough one for banks. While higher interest rates will keep supporting banks’ top line, an economic slowdown will result in a gradual drop in loan demand. Hence, investors are pessimistic about the performance of the banking industry and wary of investing in the industry players. However, investors can follow stocks – Wells Fargo & Company (WFC - Free Report) , Citizens Financial Group, Inc. (CFG - Free Report) and Hancock Whitney Corporation (HWC - Free Report) – that analysts show interest in because they have a better understanding of the company fundamentals.
Analysts have a detailed insight into the overall sector and industry. They place company fundamentals against the current economic backdrop to determine how a particular stock will fare as an investment. Hence, analyst recommendations can help pick suitable stocks for generating robust returns.
3 Analyst Suggested Bank Stocks for 2023
We shortlisted the above-mentioned three bank stocks with the help of the Zacks Stock Screener. These stocks have a Zacks Rank of 2 (Buy). Further, more than 70% of brokers recommend these stocks as a strong buy or buy. Our research shows such stocks provide good investment opportunities.
The chosen stocks have lost value due to ongoing concerns but have robust earnings prospects and are expected to perform well in 2023. This optimistic stance signifies bullish analyst sentiments, reflecting solid fundamentals and the expectation of outperformance going forward.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
Wells Fargo, based in San Francisco, is one of the largest financial services companies in the United States. The company offers services across North America and globally through more than 4,500 retail bank branches and a broad ATM network.
While legal and regulatory troubles continue to mar WFC’s near-term prospects (the most recent being a $3.7 billion settlement with the CFPB over several matters related to automobile lending, consumer deposit accounts and mortgage lending), such resolutions seem to be a step forward for removing the asset cap imposed by the Fed.
Wells Fargo continues to build on its deposit base. While the pace of deposit growth is likely to continue moderating in the near term on the economic slowdown, the considerable strength in its consumer business and commercial banking segments will likely aid the deposit balance in the upcoming period. Further, WFC is focused on lowering its expense base by streamlining organizational structure, consolidating branches and reducing headcount by optimizing operations and other back-office teams. Realized and identified potential gross savings through these efforts are expected to be in excess of $10 billion.
Wells Fargo, with a market cap of $159.4 billion, has lost 14.6% in the year-to-date period. While the company’s earnings are expected to decline 24% for 2022, the same is projected to rebound and surge 34.7% for 2023.
Citizens Financial, headquartered in Providence, RI, is one of the largest retail bank holding companies in the United States. CFG operates roughly 1200 branches and around 3,300 ATMs in 14 states and the District of Columbia.
Robust loans and deposit balances, and higher interest rates will keep aiding net interest income and margin. Citizens Financial’s focus on executing a series of revenue and efficiency initiatives led to the introduction of “Tapping Our Potential” (TOP) program in late 2014. It remains on track for more than $115 million of pre-tax run-rate benefits through the TOP 7 Program in 2022. The bank is well-poised to grow via acquisitions, reflected in its accomplishment of several major buyouts in the last several years. These efforts enable the company to expand its product capabilities and geographic reach.
Shares of CFG, which has a market cap of $18.8 billion, have lost 19.5% so far this year. For 2022, the company’s earnings are projected to witness a year-over-year fall of 22.7%. For 2023, earnings are expected to jump 23.4%.
Hancock Whitney is a bank and financial holding company, which operates through 177 full-service bank branches and 239 ATMs across Mississippi, Alabama, Louisiana, Florida and Texas. Supported by the continued rise in loan demand, higher interest rates and business expansion initiatives, this Gulfport, MS-based company’s bottom line is likely to keep improving.
The company’s strategic investments in growth and new markets are expected to bolster its top line. Further, the company noted that higher rates helped it reach the targeted efficiency ratio of 55% well ahead of time. Management projects total core loan growth to be 8-9% this year. Apart from organic expansion efforts, HWC has undertaken acquisitions in the past, which continue to support its financials. Given the strong balance sheet position, the company is well-poised to further grow through inorganic means to diversify revenues and improve market share.
For 2022, HWC’s earnings are projected to witness year-over-year growth of 7.5%. For 2023, earnings are expected to rise 3.4%. The company has a market cap of $4 billion. Its shares have declined 5.1% in the year-to-date period.
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3 Bank Stocks Wall Street Analysts Recommend for 2023
Bank stocks were under pressure for a large part of 2022. Several serious headwinds, including record-high inflation, global supply-chain disruptions and the ongoing Russia-Ukraine conflict, wreaked havoc with the investors’ confidence, leading to bearish sentiments.
The Federal Reserve stepped up its monetary policy with an ultra-aggressive stance to counter the “sticky” inflation. This resulted in the short-term interest rates reaching a 15-year high of 4.50% this year, with the central bank indicating more rate hikes in 2023. As we know, banks thrive in rising rate regimes, but this hawkish stance has increased the chances of economic slowdown and/or recession next year. Even the Fed’s December Summary of Economic Projections suggests that the U.S. economy will be slowing down considerably next year, with just 0.5% growth.
Thus, the new year is going to be a tough one for banks. While higher interest rates will keep supporting banks’ top line, an economic slowdown will result in a gradual drop in loan demand. Hence, investors are pessimistic about the performance of the banking industry and wary of investing in the industry players. However, investors can follow stocks – Wells Fargo & Company (WFC - Free Report) , Citizens Financial Group, Inc. (CFG - Free Report) and Hancock Whitney Corporation (HWC - Free Report) – that analysts show interest in because they have a better understanding of the company fundamentals.
Analysts have a detailed insight into the overall sector and industry. They place company fundamentals against the current economic backdrop to determine how a particular stock will fare as an investment. Hence, analyst recommendations can help pick suitable stocks for generating robust returns.
3 Analyst Suggested Bank Stocks for 2023
We shortlisted the above-mentioned three bank stocks with the help of the Zacks Stock Screener. These stocks have a Zacks Rank of 2 (Buy). Further, more than 70% of brokers recommend these stocks as a strong buy or buy. Our research shows such stocks provide good investment opportunities.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The chosen stocks have lost value due to ongoing concerns but have robust earnings prospects and are expected to perform well in 2023. This optimistic stance signifies bullish analyst sentiments, reflecting solid fundamentals and the expectation of outperformance going forward.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
Wells Fargo, based in San Francisco, is one of the largest financial services companies in the United States. The company offers services across North America and globally through more than 4,500 retail bank branches and a broad ATM network.
While legal and regulatory troubles continue to mar WFC’s near-term prospects (the most recent being a $3.7 billion settlement with the CFPB over several matters related to automobile lending, consumer deposit accounts and mortgage lending), such resolutions seem to be a step forward for removing the asset cap imposed by the Fed.
Wells Fargo continues to build on its deposit base. While the pace of deposit growth is likely to continue moderating in the near term on the economic slowdown, the considerable strength in its consumer business and commercial banking segments will likely aid the deposit balance in the upcoming period. Further, WFC is focused on lowering its expense base by streamlining organizational structure, consolidating branches and reducing headcount by optimizing operations and other back-office teams. Realized and identified potential gross savings through these efforts are expected to be in excess of $10 billion.
Wells Fargo, with a market cap of $159.4 billion, has lost 14.6% in the year-to-date period. While the company’s earnings are expected to decline 24% for 2022, the same is projected to rebound and surge 34.7% for 2023.
Citizens Financial, headquartered in Providence, RI, is one of the largest retail bank holding companies in the United States. CFG operates roughly 1200 branches and around 3,300 ATMs in 14 states and the District of Columbia.
Robust loans and deposit balances, and higher interest rates will keep aiding net interest income and margin. Citizens Financial’s focus on executing a series of revenue and efficiency initiatives led to the introduction of “Tapping Our Potential” (TOP) program in late 2014. It remains on track for more than $115 million of pre-tax run-rate benefits through the TOP 7 Program in 2022. The bank is well-poised to grow via acquisitions, reflected in its accomplishment of several major buyouts in the last several years. These efforts enable the company to expand its product capabilities and geographic reach.
Shares of CFG, which has a market cap of $18.8 billion, have lost 19.5% so far this year. For 2022, the company’s earnings are projected to witness a year-over-year fall of 22.7%. For 2023, earnings are expected to jump 23.4%.
Hancock Whitney is a bank and financial holding company, which operates through 177 full-service bank branches and 239 ATMs across Mississippi, Alabama, Louisiana, Florida and Texas. Supported by the continued rise in loan demand, higher interest rates and business expansion initiatives, this Gulfport, MS-based company’s bottom line is likely to keep improving.
The company’s strategic investments in growth and new markets are expected to bolster its top line. Further, the company noted that higher rates helped it reach the targeted efficiency ratio of 55% well ahead of time. Management projects total core loan growth to be 8-9% this year. Apart from organic expansion efforts, HWC has undertaken acquisitions in the past, which continue to support its financials. Given the strong balance sheet position, the company is well-poised to further grow through inorganic means to diversify revenues and improve market share.
For 2022, HWC’s earnings are projected to witness year-over-year growth of 7.5%. For 2023, earnings are expected to rise 3.4%. The company has a market cap of $4 billion. Its shares have declined 5.1% in the year-to-date period.