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5 Bank Stocks Set to Rebound With Vaccine-Driven Economic Recovery

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·8 min read
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The year, which remained mostly turbulent, is finally ending on an optimistic note. Rollout of coronavirus vaccine has instilled confidence of resumption of normal activities, thereby supporting economic recovery. Also, it has set the stage for bank stocks to witness a stark rebound in 2021.

Robert Redfield, director at Centers for Disease Control and Prevention, stated that more than a millionAmericans have already received the first dose of vaccine with the government targeting for 100 million people to be immunized by the end of first-quarter 2021, and another 100 million by the second quarter. In this aspect, U.S. government announced a second agreement yesterday with Pfizer PFE and BioNTech BNTX to buy additional 100 million shots, expected to be delivered by July 2021.

Notably, last week, Moderna MRNA received the U.S. Food and Drug Administration authorization for emergency use against COVID-19 in individuals 18 years of age or older. Moreover, per an article by Livemint, a third vaccine from Johnson & Johnson JNJ could be approved as early as next month.

Since positive vaccine data filled markets in November, SPDR S&P Regional Banking ETF and KBW Nasdaq Bank Index have jumped 22.2% and 22.7%, respectively, reflecting bullish sentiments of investors on growth prospects of banks. Also, the Zacks Major Regional Banks industry and Zacks Banks & Thrifts industry have gained 25.9% and 21.6%, outperforming the 12% rally for the S&P 500 Index over the same time frame.

Is the Worst Over?

Despite maintenance of social distancing norms, use of masks and greater awareness regarding the virus, cases continue to come at record high levels. Per the Covid Tracking Project, since November, figures have witnessed a sharp rise. The seven-day averages of new daily cases reached a high of 207,824 with 115,503 hospitalizations and 2,649 deaths on Dec 23.

Meanwhile, amid the ongoing pandemic, the discovery of a new COVID-19 strain has made us wary about the efficacy of the vaccines. This new variant, first discovered in England, has already spread to some other countries and has resulted in several nations imposing restrictions on travel from the U.K.

Nevertheless, a CNN report has stated that Pfizer/BioNTech and Moderna are testing their coronavirus vaccines against the new mutated version. Also, the scientists are quite confident that these vaccines will be able to tackle the new variant as well.

How Vaccine News is Driving Bank Stocks

With more and more vaccines being distributed, chances of economic recovery are rising on account less uncertainty, improving consumer confidence and restoration of normal activities.

Vaccine-driven economic recovery is expected to raise loan demands, as people are likely to resume investments in business and other needs. This will boost net interest income for banks, despite low interest rates, and support profitability to some extent.

Also, capital markets activities are getting better as can be seen in rising deals announced and increasing IPOs. Advisory revenues are likely to be of major help to the banks fee income on this account.

Further, the Congress recently passed the $900 billion COVID-19 stimulus bill, which is likely to help the banks in getting respite from loan-loss uncertainty, which had led them to build billions of dollars of reserves in the first three quarters of 2020.

Notably, major U.S. banks cleared the second round of stress tests, which, to a great extent, reflect the stability of the banking system. Considering this, banks have been permitted to resume share repurchases from next year and maintain dividends at current levels.

Despite positive developments on dealing with this health crisis, the pandemic will continue for a while. Cases will continue to be reported as distribution of vaccine on a global level might take time. Nevertheless, investors looking to invest can always keep an eye on fundamentally strong bank stocks.

5 Bank Stocks Likely to Rebound in 2021

JPMorgan JPM: Headquartered in New York, JPMorgan is one of the biggest banks with assets valued at $3.25 trillion. Its earnings are projected to grow 17.1% in 2021. Moreover, the Zacks Consensus Estimate for the next year earnings has been revised upward by 2% over the past 60 days.

The lender continues to expand its footprint in new regions by opening branches. The bank aims to enter 15-20 new markets by the end of 2022 by opening roughly 400 new branches. The company has already made progress on this front, having added nearly 120 new branches so far and plans to take the number to more than 150 by the end of this year.

Following the Fed's second round of stress test and subsequent approval, the company will resume repurchases in first-quarter 2021. For 2021, it has authorized to repurchase shares worth up to $30 billion.

Since November, shares of the company have gained 24.8%. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Bank of Hawaii Corporation BOH: Based in Honolulu, HI, the bank provides a broad array of products and services in Hawaii, Guam and other Pacific Islands.

Organic growth remains a key strength for Bank of Hawaii, as reflected by its revenue growth story. Moreover, the low-cost funding source — non-interest-bearing deposits — representing more than 29% of total deposits, is anticipated to boost the net interest income and margin. Hence, we believe the company is well positioned to maintain its increasing revenue trend in the days to come.

Bank of Hawaii’s earnings are projected to grow 10.8% in 2021. Moreover, analysts seem to be optimistic regarding the company’s earnings growth prospects. Thus, the Zacks Consensus Estimate for its 2021 earnings has been revised upward by 5.1% over the past 60 days.

The stock currently carries a Zacks Rank #2 (Buy). Since the positive vaccine developments in November, its shares have gained 26.3%.

Bank OZK OZK: The company currently sports a Zacks Rank #1 and its shares have rallied 23.5% since the beginning of November. Headquartered in Little Rock, AR, Bank OZK offers a wide range of retail and commercial banking services to businesses, individuals, and non-profit and governmental entities.

Bank OZK has grown substantially through de novo branching strategy as well as inorganically. Given a robust liquidity position and decent earnings strength, the bank is likely to be able to continue meeting debt obligations in the near term.

With vaccine-powered improvement in economy, the bank is likely to gain from better lending scenario and reap benefits from pent-up consumer demand.

For 2021, the company’s earnings are projected to grow 41.3%. Moreover, the Zacks Consensus Estimate for its 2021 earnings has been revised upward by 8.8% over the past 60 days.

UMB Financial Corporation UMBF: Based in Kansas City, MO, UMB Financial Corporation provides banking services and asset servicing in the United States.

The company has been focused on diversifying operations to non-interest sources of revenues in order to reduce exposure to interest rates to balance the unprecedented risks related to rate environment.

Also, its capital ratios remain well above the required levels. We believe that a strong capital position will help it undertake opportunistic expansions in the future. Also, capital strength supports the company’s plan to invest in technology, which might drive operating leverage in the near term.

UMB Financial’s earnings are projected to grow 2.2% in 2021. Moreover, analysts seem to be optimistic regarding the company’s earnings growth prospects. Thus, the Zacks Consensus Estimate for its 2021 earnings has been revised upward by 18.8% over the past 60 days.

The stock currently carries a Zacks Rank #2. Since November, its shares have gained 12.2%.

Synovus Financial Corp. SNV: Headquartered in Columbus, GA, Synovus Financial Corp. is a diverse financial services company that conducts its banking operations through Synovus Bank. It provides integrated financial services, including commercial and retail banking, financial management, insurance and mortgage services to its customers.

Its earnings are projected to grow 37.7% in 2021. Moreover, the Zacks Consensus Estimate for the next year earnings has been revised upward by 3.2% over the past 60 days.

Driven by its solid liquidity position, Synovus has been making strategic investments through mergers and acquisitions. In May 2019, it completed the transition of FCB Financial Holdings and about $40 million in pre-tax synergies is anticipated to be fully realized by 2020. Moreover, the company looks forward to tapping similar opportunities in the future as well.

Also, the company’s loans balance have witnessed a compound annual growth rate of 13.5% for the last five years (2015-2019), which largely supported the net interest income. With an expected rebound in 2021, loans balance for Synovus might continue increasing and aid bottom-line growth.

Since November, shares of the company have gained 23.6%. It currently carries a Zacks Rank #2.

Zacks Top 10 Stocks for 2021

In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2021?

These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Start Your Access to the New Zacks Top 10 Stocks >>


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JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
 
Johnson & Johnson (JNJ) : Free Stock Analysis Report
 
Pfizer Inc. (PFE) : Free Stock Analysis Report
 
Moderna, Inc. (MRNA) : Free Stock Analysis Report
 
Synovus Financial Corp. (SNV) : Free Stock Analysis Report
 
UMB Financial Corporation (UMBF) : Free Stock Analysis Report
 
Bank of Hawaii Corporation (BOH) : Free Stock Analysis Report
 
Bank OZK (OZK) : Free Stock Analysis Report
 
BioNTech SE Sponsored ADR (BNTX) : Free Stock Analysis Report
 
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