7 of the Best Bank Stocks to Buy for 2018

These are 2018's top financial stocks.

The first year of the Trump administration was great for the financial sector, which, with a few weeks left in the year, had risen 19 percent in 2017 alone. Despite that steady rise, the rally looks poised to continue as the effects of a rising rate environment, deregulation and the possibility of tax cuts begin to meaningfully improve profitability. Those three factors, once in motion, can't be stopped overnight. With these meaningful long-term tailwinds now in play, financials can continue to outperform other sectors. For investors thinking about boosting their exposure to the area, here are seven of the best bank stocks to buy for 2018.

Customers Bancorp Inc (NYSE: CUBI)

CUBI is a small-cap regional bank that looks like one of the most undervalued names in the entire market. By mid-2018 it will spin off its growing but unprofitable BankMobile division in a transaction expected to be worth about $3.57 per share, leaving shareholders the conservatively managed traditional banking business. CUBI suffered in 2017 after writing off a bad investment that damaged earnings per share, but with that impairment almost totally behind it, EPS is expected to rise 27 percent in 2018 -- and it wouldn't be shocking for CUBI to rise that amount, either. Just remember that its smaller size could make it slightly more unpredictable than bigger companies.

JPMorgan Chase & Co. (JPM)

JPMorgan shares have a lower risk-reward profile than CUBI, but it's still one of the best bank stocks to buy for 2018, especially for more conservative investors. America's most valuable bank pays a sustainable 2.1 percent dividend that helped it rank as one of 2018's best dividend stocks as well. CEO Jamie Dimon is widely considered one of the best in the biz and is one of the few CEOs who remains at the helm after successfully navigating his company through the depths of the Great Recession. JPM's staggering $19 billion stock buyback program slated to run through the end of June shouldn't hurt shares either.

Synchrony Financial (SYF)

While JPMorgan shareholders reaped the major gains that characterized the financial sector's impressive 2017, Synchrony Financial shares languished for much of the year -- that is, before Warren Buffett began snapping up shares and Wall Street woke up to its own irrationality. Up 40 percent from its lows but only 3 percent on the year, the private-label credit card issuer trades at just 14 times earnings, should benefit from rising consumer spending, and is expected to see EPS grow 22 percent in 2018. Buffett's Berkshire Hathaway (BRK.A, BRK.B) continued to add to its SYF position in the third quarter, and following the Oracle of Omaha is rarely a bad move.

BofI Holding Inc. (BOFI)

It might be counterintuitive, but one of the best bank stocks to buy for 2018 is a bank without branches: BofI, or Bank of Internet. As you might imagine, this gives the company major cost advantages over more traditional banks and results in vastly superior margins. This $1.8 billion company doesn't pay a dividend, but it does offer the sort of growth that few banks can, and at a very cheap multiple to boot. Shares still trade at just 13 times earnings, while both earnings and EPS are expected to jump 14 to 15 percent this fiscal year.

Citigroup Inc (C)

Getting back to the mega-cap names, Citigroup is probably the cheapest of the major U.S. banks right now. Its price-book ratio sits under 1, which is quite unusual, especially for banks in Citigroup's league. By comparison, the next-cheapest is Bank of America Corp (BAC) at a P/B ratio of about 1.2. Like JPMorgan, Citigroup is moving quickly to take advantage of the improving macroeconomic winds; the board approved Citi's largest share buyback ever ($15.6 billion) and decided to double the dividend in June of 2017 in a move indicative of the company's confidence in itself. Citigroup has earned its position as one of the best bank stocks to buy for 2018.

Wells Fargo & Co (WFC)

With shares under heavy fire from its fake accounts scandal, WFC shares badly underperformed both their peers and the larger market in 2017, but since bottoming out in September, the stock has rebounded and has more room to run in the new year. Notably, WFC is another favorite of Buffett, who has made a point to express conviction in the current management and whose holding company, Berkshire Hathaway, owns nearly 10 percent of all Wells Fargo shares. A 2.6 percent dividend will pay you just to wait around and is the highest yield of any name on the best bank stocks to buy for 2018 list.

CME Group Inc (CME)

Technically, CME Group isn't a bank. But it falls well within the financial sector, and as an operator of futures and options exchanges, it reaps the benefits of a business with extremely high barriers to entry, few competitors and products that everyone from institutional investors to farmers can't go without. Its subsidiary, the Chicago Mercantile Exchange, is the largest futures exchange in the world, and CME also owns 24 percent of the S&P Dow Jones Indices, which maintains and licenses the world's two most famous stock market indexes. CME is also one of the first exchanges to offer bitcoin futures, which could generate big revenue for the company in 2018.

John Divine is an investing reporter for U.S. News & World Report, where he covers financial markets and the economy, with a focus on individual stock analysis. He has been an investor himself for over 10 years, and has been writing professionally about stocks and investing for the last five years. He previously wrote about the stock market for The Motley Fool and InvestorPlace, and his work has appeared on Yahoo! Finance, MSN Money, and AOL DailyFinance. He graduated from Appalachian State University in 2011 with a bachelor's degree in finance and banking. At Appalachian, he was a member of the Bowden Investment Group, a team of students that ran a real-money portfolio worth over $100,000. You can follow him on Twitter or give him the Tip of the Century at jdivine@usnews.com.