After a rough year in 2022, bank stocks faced a fresh minefield in 2023. Rising interest rates triggered a sharp decline in long-term bond prices, resulting in massive losses for banks holding them on their balance sheets. As a result, a handful of U.S. regional banks collapsed in March and April as a banking crisis rattled Wall Street. Investors are understandably concerned about liquidity issues and instability within the banking industry, but temporary weakness in high-quality bank stocks could also prove to be an excellent long-term buying opportunity for investors.
Here are eight of the best bank stocks to buy in 2023, according to CFRA Research analysts:
|Stock||Implied upside over July 12 closing price|
|JPMorgan Chase & Co. (ticker: JPM)||8%|
|Bank of America Corp. (BAC)||39.6%|
|Wells Fargo & Co. (WFC)||15.6%|
|HSBC Holdings PLC (HSBC)||7.3%|
|Bank of Montreal (BMO)||11.8%|
|PNC Financial Services Group Inc. (PNC)||14%|
|Fifth Third Bancorp (FITB)||21.4%|
|Regions Financial Corp. (RF)||21.8%|
JPMorgan Chase & Co. (JPM)
JPMorgan Chase is one of the largest global financial services companies, with nearly $4 trillion in assets. Analyst Kenneth Leon says JPMorgan’s recent purchase of First Republic Bank is a far cry from its acquisitions of the distressed assets of Bear Stearns and Washington Mutual during the 2008-2009 financial crisis. Leon says First Republic’s roughly $30 billion in securities and $92 billion in deposits are “clean” assets. The deal also gives JPMorgan valuable exposure to venture capital and technology clients in California. CFRA has a “buy” rating and $160 price target for JPM stock, which closed at $148.15 on July 12.
Bank of America Corp. (BAC)
Bank of America is one of the largest U.S. commercial and investment banks and wealth management services providers. Leon says the bank’s business is well positioned to benefit from a rebound in lending and investment banking in the second half of 2023. Bank of America’s asset portfolio is highly rate sensitive, meaning its net interest margins could benefit from higher interest rates as long as the economy doesn’t fall into a severe recession. Leon says the bank is a market leader in retail consumer and small business banking. CFRA has a “buy” rating and $41 price target for BAC stock, which closed at $29.36 on July 12.
Wells Fargo is one of the largest U.S. banks, lending mostly within the U.S. market. Leon says Wells Fargo is on track to generate profitable growth and is gaining operating momentum following its multiyear transformation. He says the bank’s leading small- and mid-sized business commercial loan portfolio is performing well, and higher interest rates are supporting Wells Fargo’s net interest income. Finally, the potential lifting of the punitive Federal Reserve asset cap could be a bullish catalyst down the road. CFRA has a “buy” rating and $50 price target for WFC stock, which closed at $43.26 on July 12.
HSBC is one of the world’s largest banking and financial services providers and has about 39 million customers. Analyst Firdaus Ibrahim says rising interest rates will improve HSBC’s profitability, and the bank’s decision to exit underperforming businesses will allow it to commit capital to more profitable segments. Ibrahim projects that strong performance from the U.K. and China markets in 2023 will help HSBC exceed its full-year target of 12% return on tangible equity. He says resumption of HSBC’s dividends and buybacks reflects management’s confidence in the bank’s outlook. CFRA has a “buy” rating and $43 price target for HSBC stock, which closed at $40.09 on July 12.
Bank of Montreal is one of the largest Canadian commercial banks. Analyst Alexander Yokum says Bank of Montreal is relatively insulated from a weak Canadian residential mortgage market, which could help the stock outperform many of its Canadian bank peers in 2023. In addition, Yokum says the Bank of the West acquisition in February will help geographically diversify Bank of Montreal’s business, expand its U.S. footprint and generate cost and revenue synergies. He says the bank’s balance sheet growth will help improve net interest income. CFRA has a “buy” rating and $102 price target for BMO stock, which closed at $91.22 on July 12.
PNC Financial Services Group Inc. (PNC)
PNC Financial Services is one of the largest U.S. banks, offering asset management and traditional, corporate and institutional banking services. PNC shares are down 19.4% year to date as of July 12 amid a U.S. regional banking crisis, but Yokum says the pullback is a buying opportunity given PNC’s stable deposit trends. In addition, he says the bank’s high portion of insured deposits, solid credit quality and relatively low unrealized losses on its securities portfolio should help reassure investors PNC is on sound financial footing. He projects 5% year-over-year revenue growth in 2023. CFRA has a “buy” rating and $145 price target for PNC stock, which closed at $127.23 on July 12.
Fifth Third Bancorp (FITB)
Fifth Third Bancorp is a U.S. regional bank that offers retail and commercial banking, consumer lending and asset management services in the Midwest and Southeast regions. Yokum says Fifth Third’s balance between retail and business customers, its relatively high portion of insured deposits and its significant geographical diversification make it less susceptible to deposit runs than the regional banks that collapsed earlier this year. He is bullish on Fifth Third’s strategy to deepen industry verticals, increase middle-market commercial lending and expand further into the Southeast. CFRA has a “buy” rating and $33 price target for FITB stock, which closed at $27.19 on July 12.
Regions Financial Corp. (RF)
Regions Financial is a U.S. regional bank that provides banking and wealth management services in 16 states in the South and Midwest regions. Yokum says Regions’ hedging program makes its net interest margins more stable than many of its peers, and the company has been proactive in restructuring its balance sheet for higher interest rates. Like many of CFRA’s other top bank stock picks, Regions has a high percentage of insured deposits. Finally, Yokum says the bank can continue to improve efficiency by reducing real estate operations. CFRA has a “buy” rating and $23 price target for RF stock, which closed at $18.89 on July 12.