A financial crisis can send entire stock sectors tumbling. History has shown that timing the market can be difficult, if not impossible. If you move to the sidelines, the tendency is to return too late after a rally has started. But what if you already have cash to put to work?
Recent action underlines what may be a golden opportunity for discerning stock pickers. Below is a screen of analysts’ ratings and price targets for U.S. bank stocks.
SVB Financial Group’s
SIVB,
announcement on March 8 that it had lost nearly $2 billion while selling securities to raise cash as deposits were flowing out was the catalyst for a banking industry crisis that is less than two weeks old.
From March 7 through March 20, the KBW Nasdaq Bank Index
BKX,
fell 24%, with dividends reinvested. During that period, subsidiaries of two of the index’s components, Signature Bank Corp. of New York
SBNY,
and SIVB, were shut down by state regulators. And now regulators and a group of banks, led by JPMorgan Chase & Co.
JPM,
CEO Jamie Dimon, are trying to put together a deal to save First Republic Bank
FRC,
of San Francisco.
On Monday, shares of New York Community Bancorp.
NYCB,
shot up 32% after NYCB purchased deposits, loans and branches of the failed Signature Bank from the Federal Deposit Insurance Corp. at a deep discount. That deal instantly transforms NYCB by making it less reliant on wholesale funding and increasing its focus on higher-yielding loans. It also appears to have lowered the risk that the bank may have to cut its dividend, which was a high 7.90%, even after Monday’s share price increase.
This is an example of how “deals with the FDIC can be very accretive for banks in a position to help,” according to KBW analyst Christopher McGratty, who upgraded NYCB to an outperform rating on Sunday.
The FDIC still hasn’t announced any agreement to sell the assets of the failed Silicon Valley Bank.
A bank stock screen
There were 78 banks or bank holding companies in the Russell 3000 Index
RUA,
that had total assets of at least $20 billion as of Dec. 31. For this screen, we have defined bank holding companies the same way we did for this list published last week of banks that had the best average returns on assets over the past 15 years.
For the new screen, we narrowed the list of the 78 banks or bank holding companies to 51 that are covered by at least nine analysts working for brokerage firms polled by FactSet.
Among the 51, 24 have majority “buy” or equivalent ratings.
Here they are, ranked by upside potential implied by consensus price targets:
| Company | Ticker | City | Share ‘buy’ ratings | March 20 price | Consensus price target | Implied 12-month upside potential | Total return from March 7 through March 20 |
| Western Alliance Bancorp |
WAL, |
Phoenix | 86% | $29.21 | $80.50 | 176% | -59% |
| Comerica Incorporated |
CMA, |
Dallas | 62% | $44.57 | $79.79 | 79% | -32% |
| Synovus Financial Corp. |
SNV, |
Columbus, Ga. | 75% | $28.35 | $46.25 | 63% | -27% |
| Webster Financial Corporation |
WBS, |
Stamford, Conn. | 77% | $39.15 | $63.29 | 62% | -22% |
| Pinnacle Financial Partners, Inc. |
PNFP, |
Nashville, Tenn. | 80% | $54.14 | $86.61 | 60% | -21% |
| Fifth Third Bancorp |
FITB, |
Cincinnati | 68% | $26.21 | $40.07 | 53% | -24% |
| Charles Schwab Corp. |
SCHW, |
Westlake, Texas | 70% | $56.11 | $85.44 | 52% | -25% |
| Hancock Whitney Corp. |
HWC, |
Gulfport, Miss. | 67% | $36.96 | $55.67 | 51% | -21% |
| East West Bancorp Inc. |
EWBC, |
Pasadena, Calif. | 67% | $54.82 | $82.36 | 50% | -25% |
| Citizens Financial Group Inc. |
CFG, |
Providence, R.I. | 74% | $31.55 | $47.17 | 49% | -18% |
| M&T Bank Corp. |
MTB, |
Buffalo, N.Y. | 54% | $121.71 | $177.28 | 46% | -16% |
| Wintrust Financial Corp. |
WTFC, |
Rosemont, Ill. | 92% | $73.15 | $105.42 | 44% | -17% |
| Wells Fargo & Co. |
WFC, |
San Francisco | 79% | $37.48 | $53.29 | 42% | -16% |
| Valley National Bancorp |
VLY, |
New York | 73% | $9.59 | $13.45 | 40% | -11% |
| Regions Financial Corp. |
RF, |
Birmingham, Ala. | 52% | $18.08 | $25.34 | 40% | -19% |
| Cadence Bank |
CADE, |
Tupelo, Miss. | 54% | $20.96 | $29.17 | 39% | -17% |
| Raymond James Financial Inc. |
RJF, |
St. Petersburg, Fla. | 54% | $91.88 | $126.45 | 38% | -13% |
| Synchrony Financial |
SYF, |
Stamford, Conn. | 52% | $28.45 | $38.67 | 36% | -18% |
| Ameriprise Financial Inc. |
AMP, |
Minneapolis | 67% | $287.81 | $377.18 | 31% | -15% |
| Bank of New York Mellon Corp. |
BK, |
New York | 55% | $43.27 | $56.35 | 30% | -13% |
| Goldman Sachs Group Inc. |
GS, |
New York | 60% | $309.53 | $400.71 | 29% | -11% |
| JPMorgan Chase & Co. |
JPM, |
New York | 63% | $127.14 | $158.18 | 24% | -8% |
| New York Community Bancorp Inc. |
NYCB, |
Hicksville, N.Y. | 59% | $8.61 | $10.47 | 22% | 3% |
| Morgan Stanley |
MS, |
New York | 59% | $85.64 | $102.23 | 19% | -11% |
| Source: FactSet | |||||||
Click on the tickers for more about each bank, including news coverage, stock dividend yields and price ratios.
Read Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.
Western Alliance Bancorp
WAL,
of Phoenix tops the list, with analysts expecting the stock nearly to triple from its close on March 20. This is also the stock on the list that dropped the most between March 7 and March 20. Western Alliance said in a press release on March 17 that after “elevated net deposit outflows” on March 13, following Signature Bank of New York’s failure on March 12, net outflows had “fallen sharply.”
McGratty has an outperform rating on Western Alliance with a price target of $85, which is higher than the consensus target. In a note to clients on March 17, he cited “significant deposit inflows and new account openings” over recent days.
Investors should expect a continuing period of volatility for bank stocks — patience may be required. If you see any stocks of interest, it is best to do your own research to understand a company’s long-term strategy and form your own opinion.
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