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2 Top-Ranked Banks Stocks to Buy on a Red-Hot November Rally
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November is turning out to be a terrific one for the U.S. stock markets. All the three major indexes – S&P 500, Nasdaq and Dow Jones – clinched a third consecutive week of gains till Friday. Even yesterday, the rally continued.
The month started with the Federal Reserve announcing no change in the interest rates after its two-day FOMC meeting. Currently, the interest rates stand at a 22-year high of 5.25-5.5%. Last month’s inflation numbers (showing further cooling down) reinforced investors’ confidence that the central bank is done raising rates. This also fueled hopes of a ‘soft landing’ in the U.S. economy.
Stocks are on a tear. In November, the S&P 500 is up 7.3%, while the Dow has gained 5.6%. The tech-heavy Nasdaq has jumped 9.4%. Even the bank stocks, which were laggards since the start of the year, are getting investor attention. Thus, one can bet on fundamentally solid lenders – Wintrust Financial Corporation (WTFC - Free Report) and Bank OZK (OZK - Free Report) – for good returns.
Before we discuss these two bank stocks in detail, let’s try to understand the reasons behind this rally in bank stocks in November.
With the Fed turning ultra-aggressive to tame persistent inflation, banks faced an increasingly difficult operating backdrop. There were three notable bank failures – Signature Bank, Silicon Valley Bank and First Republic Bank – this year amid deposit flight to higher return-generating investment alternatives.
This majorly shook investors’ confidence in bank stocks. Also, higher rates and a gradual slowdown in loan demand turned counterproductive to banks’ top line, hurting net interest income (NII) and margin growth. But now, with the expectations of no further hike in the interest rates and market participants pricing in rate cuts in the first half of 2024, bank stocks are on a roll.
The KBW Nasdaq Regional Banking Index, which was down almost 26% till October, is trading in green this month. The index is up 12.4% in November. Also, the S&P Regional Banks Select Industry Index, which plunged 32% for the first 10 months of 2023, has gained almost 13% in November.
But banks are not out of the woods.
The issue of high rates for longer is expected to exert pressure on NII well into 2024 as business activities continue to slow down. Hence, banks’ ability to boost profits remains a big challenge. This is further aggravated by huge unrealized losses on bonds and competition for deposits. The rating agencies – Moody’s and Fitch – have cautioned against ‘sticky’ inflation.
So, one must exercise caution while investing in bank stocks.
The two selected stocks have outperformed the industry in November and have a market cap of $4.5 billion or more. The banks are expected to be profitable next year as well. Also, both have a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Now, let’s discuss both banks in detail.
Wintrust Financial, based in Rosemont, IL, has more than 150 Wintrust Community Bank locations in Illinois, Wisconsin and Indiana through its 15 community bank subsidiaries. Higher interest rates, decent loan demand and efforts to improve fee income will continue to support the company’s financials.
Over the years, WTFC has grown substantially through acquisitions. Also, solid liquidity position and capital levels keep aiding the company.
Its capital distributions are impressive too. In the last five years, Wintrust Financial hiked its quarterly dividend five times, with an annualized dividend growth rate of 13%. Its payout ratio currently sits at 16% of earnings.
With a market cap of $5.3 billion, WTFC’s earnings are expected to grow 21.9% in the next two years. The company’s shares have rallied 14.9% in November, outperforming the industry’s growth of 13.5%.
Image Source: Zacks Investment Research
Bank OZK conducts operations through more than 240 offices in eight states, including Arkansas, Georgia, Florida, North Carolina, Texas, California, New York and Mississippi. Higher rates, along with Bank OZK's branch consolidation efforts and organic growth, are likely to keep aiding financials.
Based in Little Rock, AR, OZK has grown substantially through de novo branching strategy and inorganically. Given a strong balance sheet, it is expected to keep expanding through acquisitions as well. On the back of decent loan demand and efforts to bolster fee income, top-line growth will continue.
Bank OZK’s capital distribution activities remain impressive. In October 2023, it hiked its dividend for the 53rd straight quarter. The company has a share repurchase plan. As of Sep 30, 2023, the plan (set to expire on Nov 9, 2023) had $133.5 million authorization remaining.
OZK has a market cap of $4.7 billion. Its earnings are projected to increase 30.3% in the next two years. In November, the company’s shares have gained 16.4%, outperforming 12.5% rise for the industry.
Image Source: Zacks Investment Research
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2 Top-Ranked Banks Stocks to Buy on a Red-Hot November Rally
November is turning out to be a terrific one for the U.S. stock markets. All the three major indexes – S&P 500, Nasdaq and Dow Jones – clinched a third consecutive week of gains till Friday. Even yesterday, the rally continued.
The month started with the Federal Reserve announcing no change in the interest rates after its two-day FOMC meeting. Currently, the interest rates stand at a 22-year high of 5.25-5.5%. Last month’s inflation numbers (showing further cooling down) reinforced investors’ confidence that the central bank is done raising rates. This also fueled hopes of a ‘soft landing’ in the U.S. economy.
Stocks are on a tear. In November, the S&P 500 is up 7.3%, while the Dow has gained 5.6%. The tech-heavy Nasdaq has jumped 9.4%. Even the bank stocks, which were laggards since the start of the year, are getting investor attention. Thus, one can bet on fundamentally solid lenders – Wintrust Financial Corporation (WTFC - Free Report) and Bank OZK (OZK - Free Report) – for good returns.
Before we discuss these two bank stocks in detail, let’s try to understand the reasons behind this rally in bank stocks in November.
With the Fed turning ultra-aggressive to tame persistent inflation, banks faced an increasingly difficult operating backdrop. There were three notable bank failures – Signature Bank, Silicon Valley Bank and First Republic Bank – this year amid deposit flight to higher return-generating investment alternatives.
This majorly shook investors’ confidence in bank stocks. Also, higher rates and a gradual slowdown in loan demand turned counterproductive to banks’ top line, hurting net interest income (NII) and margin growth. But now, with the expectations of no further hike in the interest rates and market participants pricing in rate cuts in the first half of 2024, bank stocks are on a roll.
The KBW Nasdaq Regional Banking Index, which was down almost 26% till October, is trading in green this month. The index is up 12.4% in November. Also, the S&P Regional Banks Select Industry Index, which plunged 32% for the first 10 months of 2023, has gained almost 13% in November.
But banks are not out of the woods.
The issue of high rates for longer is expected to exert pressure on NII well into 2024 as business activities continue to slow down. Hence, banks’ ability to boost profits remains a big challenge. This is further aggravated by huge unrealized losses on bonds and competition for deposits. The rating agencies – Moody’s and Fitch – have cautioned against ‘sticky’ inflation.
So, one must exercise caution while investing in bank stocks.
The two selected stocks have outperformed the industry in November and have a market cap of $4.5 billion or more. The banks are expected to be profitable next year as well. Also, both have a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Now, let’s discuss both banks in detail.
Wintrust Financial, based in Rosemont, IL, has more than 150 Wintrust Community Bank locations in Illinois, Wisconsin and Indiana through its 15 community bank subsidiaries. Higher interest rates, decent loan demand and efforts to improve fee income will continue to support the company’s financials.
Over the years, WTFC has grown substantially through acquisitions. Also, solid liquidity position and capital levels keep aiding the company.
Its capital distributions are impressive too. In the last five years, Wintrust Financial hiked its quarterly dividend five times, with an annualized dividend growth rate of 13%. Its payout ratio currently sits at 16% of earnings.
With a market cap of $5.3 billion, WTFC’s earnings are expected to grow 21.9% in the next two years. The company’s shares have rallied 14.9% in November, outperforming the industry’s growth of 13.5%.
Image Source: Zacks Investment Research
Bank OZK conducts operations through more than 240 offices in eight states, including Arkansas, Georgia, Florida, North Carolina, Texas, California, New York and Mississippi. Higher rates, along with Bank OZK's branch consolidation efforts and organic growth, are likely to keep aiding financials.
Based in Little Rock, AR, OZK has grown substantially through de novo branching strategy and inorganically. Given a strong balance sheet, it is expected to keep expanding through acquisitions as well. On the back of decent loan demand and efforts to bolster fee income, top-line growth will continue.
Bank OZK’s capital distribution activities remain impressive. In October 2023, it hiked its dividend for the 53rd straight quarter. The company has a share repurchase plan. As of Sep 30, 2023, the plan (set to expire on Nov 9, 2023) had $133.5 million authorization remaining.
OZK has a market cap of $4.7 billion. Its earnings are projected to increase 30.3% in the next two years. In November, the company’s shares have gained 16.4%, outperforming 12.5% rise for the industry.
Image Source: Zacks Investment Research