Interest rates have increased, presenting opportunities and challenges for bank stocks. On the one hand, higher rates allow banks to expand their net interest margins. However, economic downturns brought on by rate hikes can slow loan growth and hurt banks' bond portfolios. While some banks have struggled recently amidst market volatility, the sell-offs have also created potential buying opportunities.
High-quality bank stocks with solid fundamentals are now trading at attractive valuations after being dragged down by broader banking sector fears. This environment may allow long-term investors to pick up shares of resilient and well-capitalized banks at discounted prices. We've highlighted the top three bank stocks benefiting from this economic rollercoaster.
JPMorgan Chase & Co. (NYSE:JPM) is a financial services company that operates globally across four business segments. Those include Consumer & Community Banking, Corporate & Investment Banking, Commercial Banking, and Asset & Wealth Management.
JPM provides banking, investment, and financial services to consumers, businesses, institutions, and governments. Key offerings include deposit accounts, lending, capital markets, advisory, payments, securities services, asset management, and retirement products. The company serves retail, corporate, institutional, and government clients through branches, ATMs, online/mobile banking, and phone centers.
JPMorgan Chase reported an excellent fourth quarter. Net revenue is up 12% year over year (YOY), from $34.5 billion to $38.574 billion. However, net income fell by 15% due to higher non-interest expenses, which grew by about 29%. This is mainly due to the ongoing integration of First Republic Bank, including overhauling most of its existing branches. So, it's not expected to affect future quarters as much. Also, the company repurchased $2 billion of common stock during the quarter. Meanwhile, analysts have given JPMorgan a strong buy rating, with a high estimate of $232 per share, representing over 34% upside potential from current levels.
Wells Fargo & Co (WFC)
Wells Fargo (WFC) bank sign in yellow and red with wagon logo. The sign is flanked by tall grass
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Next on our list of bank stocks to own in February 2024 is Wells Fargo & Co (NYSE:WFC), a financial service holding company. It provides banking, lending, investment, and wealth management services to consumers, businesses, corporations, governments, and institutions.
WFC operates through four segments: Consumer Banking, Commercial Banking, Corporate and Investment Banking, and Wealth and Investment Management. The Consumer Banking segment offers checking, savings, credit cards, and lending services. The Commercial Banking segment provides lending, leasing, and treasury management services. The Corporate and Investment Banking segment offers capital markets, banking, trading, research, and financial advisory services. Finally, the Wealth and Investment Management segment provides wealth management, brokerage, planning, private banking, and trust services.
UnidosUS and Wells Fargo have recently partnered on an outreach program to inform unbanked Latinos about Bank On certified accounts. Working with the Cities for Financial Empowerment Fund, the effort seeks to overcome obstacles like minimum balance fees and lack of familiarity that can limit access to mainstream banking services. This can potentially increase the company's customer base.
WFC had an excellent fourth quarter. Revenue was $20.478 billion, up from $20.03 billion YOY. Net income also rose to $3.45 billion, compared to $3.16 billion. Diluted EPS increased to $0.86 from $0.75, and ROE improved to 7.6% versus 7.1% YOY. Wells Fargo repurchased 51.7 million shares for $2.4 billion during the quarter and also declared a dividend of $0.35 per share. Analysts rate Wells Fargo a strong buy with a high estimate of $66, citing over 31% upside potential from current levels.
East West Bancorp (EWBC)
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East West Bancorp (NASDAQ:EWBC) operates as a bank holding company for East West Bank, providing personal and commercial banking services to individuals and businesses. The company has three business segments of consumer and business banking, commercial banking, and other operations.
East West Bancorp accepts various deposit products, including checking and savings accounts, money market accounts, and time deposits. Its loan products include real estate, commercial, trade finance, project finance, equipment financing, and other business and consumer loans.
EWBC released its third quarter financial results, reporting total revenue of $648 million, a 3% increase YOY. Net income came in at $288 million, representing diluted EPS of $2.20, down 3% yet still 6.88% higher than analyst estimates. Total loans reached $50.91 billion, up 7% YOY, while total deposits increased to $55.09 billion, a 2% increase from $53.86 billion.
Meanwhile, analysts maintain a strong buy rating on East West Bancorp stock with a high price target of $86, citing over 15% upside potential from current levels.
On the date of publication, Rick Orford did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Rick Orford is a Wall Street Journal best-selling author, investor, influencer, and mentor. His work has appeared in the most authoritative publications, including Good Morning America, Washington Post, Yahoo Finance, MSN, Business Insider, NBC, FOX, CBS, and ABC News.
