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2026 Can Be a Great Year for Banks: 3 Solid Stock Picks
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Key Takeaways
Fed rate cuts and stabilizing funding costs set the stage for a potentially favorable 2026 for banks.
EWBC is highlighted for solid loan demand, fee income focus, and a strong liquidity position.
USB and KEY are benefiting from strategic acquisitions and rising NII as credit demand shows early recovery.
This year has had no shortage of surprises for investors. It began with optimism as President Donald Trump’s return fueled expectations of a more business-friendly environment. That confidence was shaken in April by the much-publicized “Liberation Day” tariff rollout, which rattled markets and created significant volatility.
Since then, markets have mounted a strong recovery, reaching record highs, supported by the Federal Reserve’s interest rate cuts. The central bank has lowered rates by 75 basis points this year and is expected to deliver another cut in 2026. This is expected to support the bank’s net interest income (NII) as funding costs stabilize and loan demand improves. With lower rates, deal-making activities are also expected to accelerate further in 2026, after witnessing a strong rebound this year. Hence, banks are expected to record a decent rise in revenues. Investors looking to position ahead of this potential upswing may want to consider East West Bancorp (EWBC - Free Report) , U.S. Bancorp (USB - Free Report) , and KeyCorp (KEY - Free Report) as compelling plays on the sector’s next phase of growth.
Beyond the macro tailwinds, banks have been focusing on artificial intelligence (AI) and technology to enhance their client experience and expand their presence online to capture a rising mobile banking population. Strategic buyouts and collaborative efforts to deepen global presence and diversify revenue streams will further bolster fee incomes.
At the same time, consumer spending remains resilient while credit demand is showing early signs of recovery, and delinquency rates have eased from their peaks despite some occasional strains. Adding to the optimism, the Fed expects U.S. economic growth to accelerate in 2026, with inflation moderating further and unemployment edging lower. Overall, bank stocks appear well-positioned to benefit from a more favorable operating environment in 2026.
3 Solid Bank Stocks for 2026
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) and a market cap of more than $10 billion. Further, these companies’ earnings are expected to grow more than 5% in 2026.
The chosen banks have performed well in the past year (up more than 10%) and have further upside potential. This optimistic stance signifies bullish analyst sentiments, reflecting solid fundamentals and expectations of outperformance.
Price Performance
Image Source: Zacks Investment Research
East West Bancorp, based in Pasadena, CA, serves as a financial bridge between the United States and China by providing various consumer and commercial banking services to the Asian-American community. The company operates through more than 110 locations in the United States and China. As of Sept. 30, 2025, East West Bancorp had $79.7 billion in total assets, $55 billion in net loans held for investment, and $66.6 billion in total deposits.
Decent loan demand, down-rate protection hedge programs, focus on improving fee income, acquiring low-cost deposits, and stabilizing funding costs are likely to support East West Bancorp’s revenues in the upcoming period.
Given solid liquidity and earnings strength, the company has been paying dividends regularly and has hiked its dividends five times in the past five years, with a dividend payout ratio of 26%.
EWBC’s earnings are projected to witness year-over-year growth of 13.4% this year and 7.4% in 2026. Over the past 60 days, earnings estimates for 2025 and 2026 have been revised 4.1% and 3.9% upward, respectively. The company has a market cap of $15.6 billion and currently carries a Zacks Rank #2.
Earnings Estimates
Image Source: Zacks Investment Research
U.S. Bancorp: Headquartered in Minneapolis, MN, the company provides banking and investment services, mainly operating in the midwestern and western regions of the United States. The company has expanded through several acquisitions over the years, which have strengthened its market position, digital capabilities and diversified revenue streams.
In the past few years, USB has acquired Salucro Healthcare Solutions LLC, MUFG Union Bank’s core franchise and fintech platforms. In June 2025, USB partnered with Fiserv to integrate its Elan Financial Services credit card program into Fiserv’s Credit Choice Solution. These efforts will continue to strengthen the company’s fee-based businesses.
Additionally, the company’s NII has been rising over the past few years. Going forward, investment portfolio repositioning, less deposit migration, lower rates, and stabilizing funding costs will continue to support NII expansion. U.S. Bancorp is experiencing solid growth in average loans and deposits in recent years as it expands relationships with existing customers and acquires new ones.
Given solid liquidity position and earnings strength, the company has been paying dividends regularly and has hiked its dividends five times in the past five years, with a dividend payout ratio of 47%.
USB, which currently carries a Zacks Rank of 2, has a market cap of $83.5 billion. Over the past 60 days, earnings estimates for 2025 and 2026 have been revised 1.8% and 1.5% upward, respectively. The Zacks Consensus Estimate for earnings indicates growth of 14.1% this year and 7.1% for 2026.
Earnings Estimates
Image Source: Zacks Investment Research
KeyCorp: Headquartered in Cleveland, OH, the company offers an extensive suite of financial products and services, including commercial and retail banking, investment management, consumer finance, commercial leasing, and investment banking solutions. As of Sept. 30, 2025, KeyCorp had $187.4 billion in total assets, $105.9 billion in loans, and $150.8 billion in deposits.
KeyCorp is well-positioned to benefit from solid loan and deposit balances, rising NII, and its efforts to strengthen fee income. KEY’s business expansion efforts are commendable. Given the buyouts/expansion initiatives, it has strengthened its product suites and market share. The company is expected to continue with opportunistic acquisitions, which are likely to help diversify revenues. Also, as demand for digital banking services continues to rise, it has been consolidating its branch network, with management looking for opportunities to right-size its footprint.
KEY maintains a strong liquidity and capital position, which enables it to pay out regular dividends. The company hiked its dividends twice in the past five years, with a dividend payout ratio of 56%.
Image: Bigstock
2026 Can Be a Great Year for Banks: 3 Solid Stock Picks
Key Takeaways
This year has had no shortage of surprises for investors. It began with optimism as President Donald Trump’s return fueled expectations of a more business-friendly environment. That confidence was shaken in April by the much-publicized “Liberation Day” tariff rollout, which rattled markets and created significant volatility.
Since then, markets have mounted a strong recovery, reaching record highs, supported by the Federal Reserve’s interest rate cuts. The central bank has lowered rates by 75 basis points this year and is expected to deliver another cut in 2026. This is expected to support the bank’s net interest income (NII) as funding costs stabilize and loan demand improves. With lower rates, deal-making activities are also expected to accelerate further in 2026, after witnessing a strong rebound this year. Hence, banks are expected to record a decent rise in revenues. Investors looking to position ahead of this potential upswing may want to consider East West Bancorp (EWBC - Free Report) , U.S. Bancorp (USB - Free Report) , and KeyCorp (KEY - Free Report) as compelling plays on the sector’s next phase of growth.
Beyond the macro tailwinds, banks have been focusing on artificial intelligence (AI) and technology to enhance their client experience and expand their presence online to capture a rising mobile banking population. Strategic buyouts and collaborative efforts to deepen global presence and diversify revenue streams will further bolster fee incomes.
At the same time, consumer spending remains resilient while credit demand is showing early signs of recovery, and delinquency rates have eased from their peaks despite some occasional strains. Adding to the optimism, the Fed expects U.S. economic growth to accelerate in 2026, with inflation moderating further and unemployment edging lower. Overall, bank stocks appear well-positioned to benefit from a more favorable operating environment in 2026.
3 Solid Bank Stocks for 2026
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) and a market cap of more than $10 billion. Further, these companies’ earnings are expected to grow more than 5% in 2026.
The chosen banks have performed well in the past year (up more than 10%) and have further upside potential. This optimistic stance signifies bullish analyst sentiments, reflecting solid fundamentals and expectations of outperformance.
Price Performance
East West Bancorp, based in Pasadena, CA, serves as a financial bridge between the United States and China by providing various consumer and commercial banking services to the Asian-American community. The company operates through more than 110 locations in the United States and China. As of Sept. 30, 2025, East West Bancorp had $79.7 billion in total assets, $55 billion in net loans held for investment, and $66.6 billion in total deposits.
Decent loan demand, down-rate protection hedge programs, focus on improving fee income, acquiring low-cost deposits, and stabilizing funding costs are likely to support East West Bancorp’s revenues in the upcoming period.
Given solid liquidity and earnings strength, the company has been paying dividends regularly and has hiked its dividends five times in the past five years, with a dividend payout ratio of 26%.
EWBC’s earnings are projected to witness year-over-year growth of 13.4% this year and 7.4% in 2026. Over the past 60 days, earnings estimates for 2025 and 2026 have been revised 4.1% and 3.9% upward, respectively. The company has a market cap of $15.6 billion and currently carries a Zacks Rank #2.
Earnings Estimates
Image Source: Zacks Investment Research
U.S. Bancorp: Headquartered in Minneapolis, MN, the company provides banking and investment services, mainly operating in the midwestern and western regions of the United States. The company has expanded through several acquisitions over the years, which have strengthened its market position, digital capabilities and diversified revenue streams.
In the past few years, USB has acquired Salucro Healthcare Solutions LLC, MUFG Union Bank’s core franchise and fintech platforms. In June 2025, USB partnered with Fiserv to integrate its Elan Financial Services credit card program into Fiserv’s Credit Choice Solution. These efforts will continue to strengthen the company’s fee-based businesses.
Additionally, the company’s NII has been rising over the past few years. Going forward, investment portfolio repositioning, less deposit migration, lower rates, and stabilizing funding costs will continue to support NII expansion. U.S. Bancorp is experiencing solid growth in average loans and deposits in recent years as it expands relationships with existing customers and acquires new ones.
Given solid liquidity position and earnings strength, the company has been paying dividends regularly and has hiked its dividends five times in the past five years, with a dividend payout ratio of 47%.
USB, which currently carries a Zacks Rank of 2, has a market cap of $83.5 billion. Over the past 60 days, earnings estimates for 2025 and 2026 have been revised 1.8% and 1.5% upward, respectively. The Zacks Consensus Estimate for earnings indicates growth of 14.1% this year and 7.1% for 2026.
Earnings Estimates
Image Source: Zacks Investment Research
KeyCorp: Headquartered in Cleveland, OH, the company offers an extensive suite of financial products and services, including commercial and retail banking, investment management, consumer finance, commercial leasing, and investment banking solutions. As of Sept. 30, 2025, KeyCorp had $187.4 billion in total assets, $105.9 billion in loans, and $150.8 billion in deposits.
KeyCorp is well-positioned to benefit from solid loan and deposit balances, rising NII, and its efforts to strengthen fee income. KEY’s business expansion efforts are commendable. Given the buyouts/expansion initiatives, it has strengthened its product suites and market share. The company is expected to continue with opportunistic acquisitions, which are likely to help diversify revenues. Also, as demand for digital banking services continues to rise, it has been consolidating its branch network, with management looking for opportunities to right-size its footprint.
KEY maintains a strong liquidity and capital position, which enables it to pay out regular dividends. The company hiked its dividends twice in the past five years, with a dividend payout ratio of 56%.
Key, which carries a Zacks Rank of 2 at present, has a market cap of $22.4 billion. The Zacks Consensus Estimate for earnings indicates growth of 27.6% this year and 19.6% for 2026. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings Estimates
Image Source: Zacks Investment Research