The operating environment has not been favorable since the beginning of 2016, but the finance sector has finally emerged triumphant. The nation’s economic health, which the sector is largely dependent on, has improved decently as indicated by increasing real GDP numbers, declining unemployment rate, improving consumer spending and stabilizing housing market.
All these led to most awaited interest rate hike this month. The interest rate was hiked to 0.50%–0.75% from 0.25%–0.50% raised in Dec 2015. In a press conference, following the decision, Federal Reserve Chairwoman Janet Yellen said: “My colleagues and I are recognizing the considerable progress the economy has made toward our dual objectives of maximum employment and price stability … We expect the economy will continue to perform well, with the job market strengthening further and inflation rising to 2 percent over the next couple of years.” Except REITs, the other Finance sector constituents – banks, brokerage firms, asset managers and insurers – typically benefit from a rising rate environment. Also, the finance companies’ performance in the third quarter was decent, despite a challenging operating environment. The companies were able to maintain bottom-line growth with improved loans and deposits, and efficient cost-control measures. Further, trading volumes improved, while mortgage lending showed strength. In addition, financial stocks have witnessed a post-election rally. Riding on higher rates and improved lending margins, along with the expectation oflesser regulations under Donald Trump administration, the finance sector has gained 8.1% since the election date. Trump's proposed infrastructure spending plans, tax cuts and reduced regulations are likely to spur economic activity. Though the ongoing structural changes are expected to continue, with investments in emerging technologies, initial market reactions post election results indicate improved prospects for financial stocks in 2017. We have picked seven stocks that not only outperformed the market, but also possess solid growth prospects. Selecting the Winning Stocks We have taken the help of the Zacks Stock Screener to shortlist financial stocks with a Zacks Rank #1 (Strong Buy) or #2 (Buy) and 60% or more positive share price movement. Here are the top seven financial stocks that meet the criteria: Dallas, TX-based Comerica Inc. ( CMA Quick Quote CMA - Free Report) is a diversified financial institution, providing various financial products and services across Texas, California, Michigan, Arizona and Florida, and in Canada and Mexico. Zacks Rank: #2 Market Cap: $11.9 billion Year-to-date Price Change: 65.0% You can see the complete list of today’s Zacks #1 Rank stocks here . CenterState Banks, Inc. , headquartered in Davenport, FL, is engaged in providing various consumer and commercial banking services to individuals, businesses, and industries in Florida. Zacks Rank: #1 Market Cap: $1.2 billion Year-to-date Price Change: 62.6% Looking for the Best Stocks for 2017? Be among the first to see our Top Ten Stocks for 2017 portfolio here. Independent Bank Group, Inc. ( IBTX Quick Quote IBTX - Free Report) , headquartered in McKinney, TX, is a bank holding company for Independent Bank, providing a range of commercial banking products and services to businesses, professionals, and individuals in the U.S. Zacks Rank: #2 Market Cap: $1.2 billion Year-to-date Price Change: 97.2% Plano, TX-based LegacyTexas Financial Group, Inc. provides various banking and financial services in the U.S. Zacks Rank: #2 Market Cap: $2.1 billion Year-to-date Price Change: 71.8% SLM Corporation ( SLM Quick Quote SLM - Free Report) headquartered in Newark, DE, operates as a saving, planning and paying for education company in the U.S. It offers private education loans to students and their families. Zacks Rank: #2 Market Cap: $4.7 billion Year-to-date Price Change: 67.9% UMB Financial Corporation ( UMBF Quick Quote UMBF - Free Report) headquartered in Kansas City, MO, provides various banking and other financial products and services in the U.S. and internationally. Zacks Rank: #1 Market Cap: $3.8 billion Year-to-date Price Change: 64.2% Salt Lake City, UT-based Zions Bancorporation ( ZION Quick Quote ZION - Free Report) is a financial holding company, providing a range of banking and related services in Arizona, California, Colorado, Idaho, Nevada, New Mexico, Oregon, Texas, Utah, Washington, and Wyoming. The company offers community banking services as well. Zacks Rank: #1 Market Cap: $8.9 billion Year-to-date Price Change: 60.2% Now See Our Private Investment Ideas While the above ideas are being shared with the public, other trades are hidden from everyone but selected members. Would you like to peek behind the curtain and view them? Starting today, for the next month, you can follow all Zacks' private buys and sells in real time from value to momentum . . . from stocks under $10 to ETF and option moves . . . from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors. Click here for Zacks' secret trades >>