With The 'Easy Trade' In Financials Now Over, BMO Sees 4 Cheap Bank Stocks With Catalysts
With the Financial Select Sector SPDR Fund (NYSE: XLF) down about 2.6 percent year-to-date, the perfect storm of rising interest rates, a booming economy and banking deregulation hasn’t delivered the bank stock returns for which many investors hoped.
After some strong returns in previous quarters, one analyst said the easy part of the banking trade is over, but there are still bargains remaining for selective buyers.
The Analyst
BMO Capital Markets analyst James Fotheringham on May 28 reiterated Buy ratings on the following bank stocks:
Capital One Financial Corp. (NYSE: COF), $126 price target.
Santander Consumer USA Holdings Inc (NYSE: SC), $23 price target.
OneMain Holdings Inc (NYSE: OMF), $41 price target.
Synchrony Financial (NYSE: SYF), $51 price target.
The Thesis
Investors need to focus on cheap bank stocks with clear catalysts, the BMO analyst said.
“The key drivers of last year's re-rating of U.S. bank stocks (e.g., improving economy, higher rates, benign credit and regulatory relief) are now well-known; the ‘easy trade’ is behind us,” he said in a note.
Three of the four stocks mentioned above have a bullish catalyst in the near-term, Fotheringham said: Santander’s parent company is buying shares of the stock, OneMain will experience funding and capital synergies with ATH and Synchrony has a Walmart Inc (NYSE: WMT) contract renewal ahead.
In general, Fotheringham said credit quality continues to improve in the U.S. financial system, and investors seem too concerned about risk when it comes to identifying the remaining value among bank stocks.
Related Links:
8 Stocks To Play The Bank Deregulation Bill
Meet The Companies Most Exposed To Subprime Auto Risk
Latest Ratings for COF
May 2018 | BMO Capital | Maintains | Outperform | Outperform |
Apr 2018 | Morgan Stanley | Maintains | Equal-Weight | Equal-Weight |
Apr 2018 | BMO Capital | Maintains | Outperform | Outperform |
View More Analyst Ratings for COF
View the Latest Analyst Ratings
See more from Benzinga
Today In Cryptocurrency: New Billion Crypto Fund, Hedge Fund Manager Says Buy Bitcoin
This Day In Market History: General Motors Declares Bankruptcy
Stifel Raises AMD Price Target After Cisco Unveils EPYC-Powered Servers
© 2018 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.