In this piece, we will take a look at the 12 best American bank stocks to buy according to analysts. If you want to skip our take on the latest bit of turmoil in the U.S. banking industry and other details, then you can jump ahead and read 5 Best American Bank Stocks To Buy According to Analysts.
The American banking industry has been one of the most important and highly watched sectors of the stock market for the past couple of years. This is because the American banking system has been at the center of the economic and stock market debate in America due to multiple reasons and events. The biggest reason is the Federal Reserve and its rapid interest rate hikes that have shocked the system and significantly tightened monetary conditions to conduct business and make purchases in the United States. The second reason is tied to the first reason since banks have been forced to be more prudent and careful when it comes to their deposit cover, asset bases, and financial statements in an era that has seen Treasury yields threaten widespread economic instability as investors dump older bonds and jump into fresh ones with juicy coupon payments.
These trends first surfaced in March 2023 during the historic American regional banking stock crisis, and as we settle into 2024, they have reared their heads once again. January has seen the American regional bank stock New York Community Bancorp, Inc. (NYSE:NYCB) witness double digit drops in the stock market. At the heart of the bank's troubles is another sector that has been in turmoil. Real estate, and particularly office real estate has faced turbulence ever since the coronavirus pandemic kicked off the remote work trend. The sector's troubles were exacerbated by the Fed's actions to bring down inflation, and safe to say, you're unlikely to find an office real estate analyst that will disagree with the notion that the environment in 2024 is markedly different from the one companies and investors were facing in 2019.
So, what do American and other banking stocks and office real estate have to do with each other? Well, NYCB's earnings report for the fourth quarter saw the firm increase its reserves to buffer against downturns in the office real estate market. The American bank stock added a whopping $552 million to its loan loss reserve, which led it to post a surprise net loss in the quarter. The loss has since resulted in New York Community Bancorp's shares dropping by an unbelievable 44% since the earnings release. If A.I. is to rule the financial markets, then predictions like this made a month in advance could transform the world. You can check out Analysts Say These 13 AI Stocks Will Skyrocket in 2024 in the meantime.
Turbulence in banking stocks due to souring American office real estate is not limited to either the U.S. or New York Community Bancorp, Inc. (NYSE:NYCB). On the other side of the world, Japanese bank Aozora Bank, Ltd. (OTC:AOZOY) announced similar troubles, with the 257 billion yen bank announcing its first annual net loss in a fiscal year in more than a decade. The Japanese bank revised its fiscal year 2023 ending in March's net profit to a net loss, and its earnings release outlined that it had "decided to strengthen our [ITS] reserves by making additional provisions to be more prepared for a potential increase in the number of workouts, including debt collection through a sale of the underlying property assets."
Naturally, analysts are now wondering whether other American banking stocks might also face similar troubles as NYCB and Aozora Bank. One such analyst is Kabir Caprihan of JPMorgan Chase & Co. (NYSE:JPM). In an analyst note released Thursday, Caprihan pointed at Zions Bancorporation, National Association (NASDAQ:ZION) and M&T Bank Corporation (NYSE:MTB) as potentially being in the same position as the New York based bank. According to the note, the two have 3.8% and 4.4% of their office loans as reserves against losses, respectively, making the analyst worry that since NYCB jacked up this percentage to 8% in the fourth quarter, Zion Bank and M&T Bank might be facing a similar predicament. The market, fearful of the contagion that greeted it last year, was quick to react and the duo's shares dropped by 11.68% and 8.35%, respectively.
With American banking stocks coming to the forefront of financial news coverage once again, we decided to look at the ones that analysts are optimistic about. Some notable stocks in this list are Western Alliance Bancorporation (NYSE:WAL), New York Community Bancorp, Inc. (NYSE:NYCB), and Valley National Bancorp (NASDAQ:VLY).
12 Best American Bank Stocks To Buy According to Analysts
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Our Methodology
To make our list of the best American banking stocks according to analysts, we ranked the forty biggest banks in the U.S. according to their average analyst share price upside and chose the top 12 stocks.
For these American banking stocks, we have also mentioned hedge fund sentiment. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
Best American Bank Stocks To Buy According to Analysts
12. Home Bancshares, Inc. (Conway, AR) (NYSE:HOMB)
Average Analyst Share Price Target Upside: 18%
Average Share Price Target: $27.29
Home Bancshares, Inc. (Conway, AR) (NYSE:HOMB) is an American regional bank headquartered in Conway, Arkansas. It serves the needs of both commercial and retail customers. As opposed to some regional banks that we've mentioned above, Home Bancshares, Inc. (Conway, AR) (NYSE:HOMB) has been doing well on the financial front as of late since it has beaten analyst EPS estimates in all four of it latest quarters.
13 out of the 910 hedge funds part of Insider Monkey's database had bought and owned Home Bancshares, Inc. (Conway, AR) (NYSE:HOMB)'s shares as of Q3 2023 end. Ken Fisher's Fisher Asset Management was the largest shareholder since it owned 2.2 million shares that are worth $47 million.
Along with New York Community Bancorp, Inc. (NYSE:NYCB), Western Alliance Bancorporation (NYSE:WAL), and Valley National Bancorp (NASDAQ:VLY), Home Bancshares, Inc. (Conway, AR) (NYSE:HOMB) is a top bank stock to buy according to analysts.
Wintrust Financial Corporation (NASDAQ:WTFC) is a diversified financial company that operates in banking, asset management, and other markets. It's one of the strongest American bank stocks on our list, since the shares are rated Strong Buy on average despite a Q4 2023 EPS miss.
Insider Monkey's third quarter of 2023 survey covering 910 hedge funds outlined that 19 had invested in the firm. Wintrust Financial Corporation (NASDAQ:WTFC)'s biggest investor among these is James Hanna's North Reef Capital due to its $52 million stake.
Cadence Bank (NYSE:CADE) is one of the larger banks on our list with operations in several states such as Alabama and Texas. Its latest financial results saw the bank try to woo investors by hiking its dividend by 6.4% and also announcing a 34 cent dividend for preferred stock.
As of September 2023 end, ten out of the 910 hedge funds surveyed by Insider Monkey were Cadence Bank (NYSE:CADE)'s shareholders.
East West Bancorp, Inc. (NASDAQ:EWBC) is a diversified bank that offers services within America and in Asia as well. Amidst a strong financial showing for 2023 that saw revenue jump by 11%, the bank also increased its dividend by 15% to reward investors for their faith.
During the previous quarter, 32 out of the 910 hedge funds covered by Insider Monkey's research had held a stake in the American bank. Out of these, Ken Griffin's Citadel Investment Group owned the biggest East West Bancorp, Inc. (NASDAQ:EWBC) stake which was worth $146 million.
Old National Bancorp (NASDAQ:ONB) is a century old regional bank set up before the American civil war. It is headquartered in Evansville, Indiana. As opposed to some other regional banks that have felt strained in today's high interest rate environment, Old National Bancorp (NASDAQ:ONB)'s latest financial results saw the firm post $1.5 billion in full year 2023 net interest income.
Insider Monkey's September quarter of 2023 survey covering 910 hedge fund shareholdings outlined that 20 had invested in Old National Bancorp (NASDAQ:ONB). Ken Griffin's Citadel Investment Group was the largest shareholder through its $69 million investment.
F.N.B. Corporation (NYSE:FNB) is a Pennsylvania based bank that also provides insurance and wealth management services. A solid stock, the shares are rated Strong Buy on average, and the 21% average analyst share price upside is also accompanied by an EPS beat in all four latest quarters.
During last year's third quarter, 26 out of the 910 hedge funds profiled by Insider Monkey were the firm's shareholders. F.N.B. Corporation (NYSE:FNB)'s biggest investor in our database is Matthew Lindenbaum's Basswood Capital as it owns $29.8 million worth of shares.
First Citizens BancShares, Inc. (NASDAQ:FCNCA) is a North Carolina based regional bank with the most expensive shares on our list in dollar terms. Its shares soared to record high levels in January 2024 as the bank reaped the benefits of the 2023 banking crisis and absorbed Silicon Valley Bank in its operations.
46 out of the 910 hedge funds part of Insider Monkey's Q3 2023 research had invested in First Citizens BancShares, Inc. (NASDAQ:FCNCA) during the time period. Out of these, Natixis Global Asset Management's Harris Associates was the largest shareholder through its $681 million stake.
Western Alliance Bancorporation (NYSE:WAL), First Citizens BancShares, Inc. (NASDAQ:FCNCA), New York Community Bancorp, Inc. (NYSE:NYCB), and Valley National Bancorp (NASDAQ:VLY) are some top American bank stocks according to analysts.