The banking sector witnessed a significant turnaround in the first half of 2019 following a disappointing performance in 2018. The KBW Nasdaq Bank Index and SPDR S&P Regional Banking ETF KRE rallied 14.2% and 14.1%, respectively, in the first half despite several concerns plaguing the sector. Both the indexes had ended 2018 in red.
One of the major factors for the bullish stance seems to be banks’ efforts to restructure operations (streamlining and expansion) to diversify footprint and revenue base. Driven by easing of stringent regulations and lower corporate tax rates that freed up capital, the banking sector is witnessing a rise in consolidation. This is expected to provide banks with additional cushion during a downturn.
Also, banks are undertaking measures to align their businesses for technology driven clients. More and more banks are spending substantially on technology to upgrade existing/new branches and ATMs with more advanced features. This is expected to lower costs and improve operating efficiency.
Further, a decent lending scenario — mainly in the areas of commercial and industrial and consumer – during first-half 2019 will support banks’ net interest income growth amid yield curve inversion, trade war concerns and the Fed’s dovish stance related to interest rate hikes. Also, efforts to focus more on non-interest income will boost top-line growth to some extent.
Moreover, the U.S. economy is growing (against expectations of slowdown). With the health of the nation being the main driving factor for banks’ financial health, this will continue to provide support.
Picking the Potential Winners
The above-mentioned factors are expected to keep supporting the banking sector in the second half of 2019 as well. Nonetheless, investors should keep an eye out for issues faced by the sector as these could have an adverse impact on bottom-line growth.
It’s not an easy task to select a handful of banking stocks that still have upside left. So, with the help of the Zacks Stock Screener, we selected bank stocks that carry a Zacks Rank #2 (Buy) or better and have current-year earnings growth expectation of 5% or more.
Also, these banks have outperformed the aforementioned bank indexes in first-half 2019.
Here are the five bank stocks that met the above criteria:
Headquartered in Cincinnati, OH, Fifth Third Bancorp FITB has rallied 18.5% in the first half of the year. With a Zacks Rank of 2, the company’s earnings are expected to grow 10.6% in 2019.
CNB Financial Corporation CCNE, based in Clearfield, PA, carries a Zacks Rank #2 and has rallied 23% in the first six months of 2019. The company’s current-year earnings are projected to increase 12.2%.
Shares of Metropolitan Bank Holding Corp. MCB have surged 42.6% in the first half. This New York-based bank’s earnings are expected to grow 23.9% in 2019. It sports a Zacks Rank 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
OFG Bancorp OFG, based in San Juan, PR, sports a Zacks Rank #1. Its shares have surged 44.4% during the first six months of 2019. The company’s earnings are expected to grow 14.5% in 2019.
Veritex Holdings, Inc. VBTX has a Zacks Rank #2 and its 2019 earnings are projected to increase 37.5%. Shares of Dallas, TX-based company have rallied 21.3% in the first half.
First-half 2019 Price Performance
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Fifth Third Bancorp (FITB) : Free Stock Analysis Report
OFG Bancorp (OFG) : Free Stock Analysis Report
CNB Financial Corporation (CCNE) : Free Stock Analysis Report
SPDR S&P Regional Banking ETF (KRE): ETF Research Reports
Veritex Holdings, Inc. (VBTX) : Free Stock Analysis Report
Metropolitan Bank Holding Corp. (MCB) : Free Stock Analysis Report
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