Top 10 Bank Stocks 2024

In early 2023, the U.S. banking sector experienced significant turmoil as several regional banks collapsed due to the impact of rising interest rates. These rate hikes caused a sharp decline in long-term bond prices, leading to substantial losses for banks holding certain types of loans on their balance sheets. While the situation appeared to stabilize in the latter half of 2023, recent events have reignited concerns in the regional banking sector.

Top 10 Bank Stocks to Invest in for 2024

New York Community Bancorp Inc. (NYCB) has become a focal point of renewed anxiety. The company's stock price plummeted following the disclosure of "material weaknesses" in its internal loan review process, sparking fresh fears about the health of regional banks.

Given this volatile landscape, carefully selecting bank stocks has become crucial for investors in 2024. To assist in this process, CFRA Research has identified 10 bank stocks they consider to be among the best investment opportunities in the current market. These selections aim to provide investors with options that may offer stability and growth potential despite the ongoing challenges in the banking sector.

JPMorgan Chase & Co. (JPM)

Implied Upside: 0.9%

JPMorgan Chase is one of the largest global financial services companies, with $3.9 trillion in assets as of the fourth quarter of 2023. The company demonstrated strong performance in 2023, generating a 17% return on equity. While JPMorgan has projected a decline in net interest income (NII) from $94 billion in 2023 to $90 billion in 2024, analyst Kenneth Leon expects investment banking fees to improve significantly in the second half of 2024. The consumer and commercial loan markets remain healthy, and lower interest rates combined with moderate loan volume growth are anticipated to be NII tailwinds. CFRA has assigned a "buy" rating and a $190 price target for JPM stock.

HSBC Holdings PLC (HSBC)

Implied Upside: 15.8%

HSBC is a global banking and financial services provider, serving over 39 million customers worldwide. Analyst Firdaus Ibrahim predicts improved profitability for HSBC as long as interest rates remain favorable. The bank's fee income growth is expected to contribute to a return on tangible equity in the mid-teens percentage range in 2024. HSBC's strong capital levels suggest it can comfortably return to a dividend payout ratio of 50%. Ibrahim projects earnings per share to increase from $1.42 in 2023 to $7.25 in 2024. CFRA has issued a "buy" rating and a $43 price target for HSBC stock.

Citigroup Inc. (C)

Implied Upside: 13.2%

Citigroup is a diversified global bank and financial services company. Analyst Kenneth Leon commends Citigroup's new strategy, which has positioned the bank to benefit from global growth in corporate and institutional banking. The company is a market leader in technology platforms, treasury services, and the growing global wealth management industry. Citigroup is actively streamlining its business by aggressively cutting its workforce, eliminating management layers, exiting its consumer banking business in Mexico, and divesting retail banking assets in Asia. CFRA has given Citigroup a "buy" rating with a $65 price target.

Bank of Montreal (BMO)

Implied Upside: 16.5%

Bank of Montreal is one of the largest Canadian commercial banks. Analyst Alexander Yokum highlights the bank's attractive geographical diversity and limited exposure to the challenging Canadian residential real estate market. While there are concerns about rising Canadian residential mortgage default rates in 2024, Bank of Montreal's diversification could insulate it from major mortgage market problems. The company's acquisition of Bank of the West is expected to generate cost and revenue synergies and expand its U.S. exposure. CFRA has assigned a "buy" rating and a $110 price target for BMO stock.

PNC Financial Services Group Inc. (PNC)

Implied Upside: 30.9%

PNC Financial Services is one of the largest U.S. banks, offering asset management and traditional, corporate, and institutional banking services. Despite facing challenges during the 2023 U.S. regional banking crisis, analyst Alexander Yokum views PNC favorably due to its geographical diversification, valuable branch network, small average account size, and strong execution. The bank's 76% loan-to-deposit ratio outperforms the U.S. regional banking industry average of 84%, and its unrealized securities portfolio losses are below average. CFRA has given PNC a "strong buy" rating with a $200 price target.

Fifth Third Bancorp (FITB)

Implied Upside: 11.7%

Fifth Third Bancorp is a U.S. regional bank offering retail and commercial banking, consumer lending, and asset management services in the Midwest and Southeast regions. Analyst Alexander Yokum notes that Fifth Third is less susceptible to deposit pressures than other U.S. regional banks, and its small average account size is expected to help its non-interest-bearing deposit performance. The bank has successfully avoided commercial real estate net charge-offs in the past year and continues to focus on growing its middle-market commercial lending. CFRA has issued a "buy" rating and a $41 price target for FITB stock.

M&T Bank Corp. (MTB)

Implied Upside: 12%

M&T Bank is a U.S. regional, commercial-focused bank providing banking, trust, and investment services primarily in the Northeast and mid-Atlantic regions. Analyst Alexander Yokum expects M&T to outperform peers in both loan and deposit perspectives. The bank has not faced the same level of unrealized losses that many of its regional banking peers have experienced in the past 12 months. Yokum notes that M&T is well-capitalized and positioned to resume share buybacks in the second half of 2024. CFRA has assigned a "buy" rating and a $160 price target for MTB stock.

Regions Financial Corp. (RF)

Implied Upside: 12.4%

Regions Financial is a U.S. regional bank providing banking and wealth management services in 16 states across the South and Midwest regions. Analyst Alexander Yokum highlights Regions' strong capital position and attractive regional exposure to the Southeast as factors that should help drive loan growth. He anticipates that share buybacks and a rebound in capital markets income will boost Regions' share price in 2024, while competing banks may struggle in a challenging environment. Yokum believes that Regions can effectively navigate the high interest rate environment, even if expected interest rate cuts are delayed. CFRA has given Regions a "buy" rating with a $22 price target.

Citizens Financial Group Inc. (CFG)

Implied Upside: 11%

Citizens Financial is a U.S. regional bank operating in the Northeast, mid-Atlantic, and Midwest regions. Analyst Alexander Yokum is bullish on Citizens' recent launch of Private Bank, which targets high-net-worth clients and may provide access to private equity and venture capital opportunities. He views the bank's entry into New York City positively and considers the decision to focus on the wealth segment of the banking industry as a prudent long-term strategy. CFRA has assigned a "buy" rating and a $38 price target for CFG stock.

East West Bancorp Inc. (EWBC)

Implied Upside: 27%

East West Bancorp is a regional commercial bank with locations in both the U.S. and China, offering consumer and commercial services. Analyst Alexander Yokum believes that East West's unique business model positions it to perform well even in a challenging environment. Unlike many of its peers, East West is not facing significant capitalization issues or unrealized losses. While competitors have been forced to prioritize capitalization, East West has been able to return to share buybacks and even increase its dividend. CFRA has given East West Bancorp a "strong buy" rating with a $97 price target.

How to Buy Bank Stocks Step by Step

To purchase bank stocks, follow these steps:

1. Open a Brokerage Account: Begin by setting up an online brokerage account specifically for trading bank stocks. Compare different brokers based on their bank stock offerings, fees, and services. Once you’ve chosen a broker that aligns with your bank investment goals, complete the application process and fund your account. This step lays the groundwork for your bank stock trading journey.

2. Research Bank Stocks: Utilize stock screeners to filter bank stocks based on criteria such as market capitalization, banking sector focus, and financial performance. Review analyst ratings for insights on bank stock potential. Consider your risk tolerance; established banks may offer stability, while emerging fintech companies could provide higher growth potential. This research helps you identify bank stocks that match your investment strategy.

3. Decide How Many Shares to Buy: Determine the number of bank stock shares you want to purchase based on your budget and the stock’s price. Diversify your bank investments across different subsectors like commercial banking, investment banking, or fintech. If certain bank stocks are expensive, consider fractional shares to gain exposure without committing large amounts of capital. Align this decision with your bank investment goals and risk tolerance.

4. Choose an Order Type: Select the appropriate order type for your bank stock purchase. A market order buys bank stocks immediately at the current price, while a limit order allows you to set a specific purchase price for the bank stock. Understanding these options helps you make informed decisions when trading bank stocks.

5. Place Your Order: After deciding on the bank stock, number of shares, and order type, place your order through your brokerage platform. Double-check all details before confirming to ensure accuracy in your bank stock purchase. Monitor the order status to confirm the successful execution of your bank stock trade.

6. Manage Your Bank Stock Portfolio: Regularly review and adjust your bank stock investments. Stay informed about banking industry trends, monitor individual bank stock performance, and review updated analyst ratings. Learn when to sell bank stocks to optimize profits or minimize losses. Periodically rebalance your bank stock portfolio to maintain alignment with your financial goals and risk tolerance in the evolving banking sector.

What to Look for When Choosing Stocks to Buy

When deciding which stocks to invest in, it is essential to consider the following important factors:

• Financial Health: Assess the company's balance sheet to determine its financial soundness. Look at its debt levels and overall fiscal condition. Additionally, analyze the company's profit margins over time, as shrinking margins might indicate financial difficulties.

• Market Position: Review the company's position within its industry. Determine whether it is gaining or losing market share compared to its competitors. A strong competitive advantage is often a sign of future success.

• Revenue and Profit Trends: Examine the company's track record of sales and earnings growth. Consistent increases in these areas are positive signs, while declining revenues may limit future opportunities and success.

• Stock Valuation: Analyze the stock's price in relation to its earnings and cash flow. Understanding its valuation is critical for evaluating future growth potential. Look for stocks that offer good value relative to their growth prospects.

• Leadership Quality: Assess the company's management team and their alignment with shareholder interests. Determine whether executives are self-serving or genuinely focused on growth. Transparency and integrity are crucial for making informed investment decisions.

• Growth Prospects: Explore the company's potential for future expansion. Identify clear pathways for growth and development, which can enhance its long-term outlook.