3 regional banks on which investors can bet

Shares of regional banks may not make all investors’ blood boil. But they are definitely worth a look.

After all, it’s a group that outperformed the S&P 500 last year rising 36% – and down a more modest 10% year-to-date, does the same in 2022. Both numbers are based on the iShares Dow Jones US Regional Bank ETF.

Exposure to small and mid-sized regional banks could be a good fit for a portfolio over the next few years. The main reason is the rise in interest rates which allows banks to generate more income from loans and thus stimulate growth. As the national economic recovery from Covid-19 unfolds, personal and commercial loan volumes are expected to increase, which will put many regional banks in a better financial position.

Another reason is the above market dividends offered by most regional banks. Half of the 14 regional banks in the S&P 500 have dividend yields of 3% or more, compared to 1.3% for the broader index.

With hundreds of publicly traded banks, finding strong candidates can be a challenge. We’ve done some legwork here. These three companies have the financial strength, growth prospects and earnings stability that investors can bring to the bank.

Are shares of Truist Financial a good value?

Truist Financial Corporation (NYSE:TFC) is the result of the merger between BB&T and SunTrust Bank. As the sixth largest bank in the country, the Charlotte-based company offers the full range of banking services to retail and commercial customers in addition to insurance.

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Lending activity is expected to increase on both sides of the business in the coming quarters, helping Truist build on a better-than-expected performance in the first quarter. As the Fed moves forward with its aggressive rate-hike campaign, the company’s net interest margin (NIM) should increase and generate stronger earnings.

Profitability should also benefit from ongoing synergies from the merger at the end of 2019. Management projects will have generated $1.6 billion in merger-related savings by the end of this year. The timing of the merger’s completion just before the pandemic began helped Truist weather the storm and should ultimately help him emerge stronger on the other side.

The stock is down nearly 30% from its January 2022 high, presenting a magnificent entry opportunity. With a forward dividend yield of 3.9%, Truist has long-term value written all over it.

Is it a good time to buy KeyCorp stock?

KeyCorp (NYSE: KEY) the shares are trading below $20 but likely won’t stay there for long. The Cleveland-based bank is participating in the market rebound and above-average trading volume brings it within striking distance of regaining the 50-day moving average.

With a strong presence in 15 states, KeyCorp operates a balanced model with personal and commercial banking services each accounting for approximately half of total revenue. During the first quarter report, management raised its guidance for several performance metrics, suggesting the outlook is bright and the stock will have some catching up to do. Estimates for loan growth, NIM and fee income have all been revised upwards and the forecast for net charges has been improved.

In addition to increased lending activity and higher lending rates, Key Bank is expected to generate growth through fintech investments. It recently announced the acquisition of loan forgiveness advisory specialist GradFin. This marks another step in the company’s plan to improve its digital capabilities in niche areas.

A P/E ratio of 8x and a dividend yield of 3.9% make KeyCorp an exceptional value. Investors can unlock great total return potential by buying here.

Which bank stock is in good financial health?

Zions Bancorporation, National Association (NASDAQ: ZION) is near the end of the alphabetical list of stocks, but belongs at the top of the list of compelling regional banking games. The Utah-based company is the epitome of resilience having survived numerous economic downturns since its founding nearly 150 years ago.

Today, Zions Bancorp operates a network of more than 400 traditional bank branches across 11 western states, including the nation’s most populous states, California and Texas. Don’t expect to see a Zions Bank branch in every state, as the company operates under six additional brands, including California Bank & Trust.

Together, the footprint drives steady revenue growth for retail and commercial customers. In 2023, Zions Bancorp’s revenue is expected to grow 10% year-over-year and top the $3 billion mark for the first time in the company’s storied history. Much of the revenue will come from small businesses that were introduced to the bank through PPP loans and have remained customers.

One of the bank’s most attractive attributes is its strong financial position. A ratio multiplied by interest earned north of 50 has increased significantly in recent quarters and reflects a strong ability to repay debt. Meanwhile, investment grade ratings from S&P and Moody’s support Zion’s access to more debt for growth opportunities or to stay afloat during times of economic crisis.

This financial position helps Zions Bancorp create shareholder value through buyouts and dividends. The company consistently exceeds EPS estimates due to organic growth and operational efficiency. A 24% decline in share price, a 9x P/E ratio and a 2.7% dividend yield make Zions a name to bet on…maybe even for another 150 years.

Should you invest $1,000 in Truist Financial right now?

Before you consider Truist Financial, you’ll want to hear this.

MarketBeat tracks Wall Street’s top-rated, top-performing research analysts daily and the stocks they recommend to their clients. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the market takes off…and Truist Financial didn’t make the list.

Although Truist Financial currently has a “Hold” rating among analysts, top-rated analysts believe these five stocks are better buys.

See the 5 actions here

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Robert D. Coleman