In this article, we will be taking a look at 12 cheap bank stocks to buy. To skip our detailed analysis of the banking sector, you can go directly to see the 5 Cheap Bank Stocks To Buy.
Major banks like JPMorgan Chase & Co. (NYSE:JPM), Morgan Stanley (NYSE:MS), and Goldman Sachs Group, Inc. (NYSE:GS), among others, are a few names in the market that have managed to remain steady in a strained economy. Kiran Ganesh, a multi-asset strategist at UBS, was quoted by WSJ as saying that 2023 has seen a strong start for bank stocks because of higher interest rates and a milder-than-expected economic contraction.
According to an S&P Global outlook on global banks for 2023, in the US, banks are expected to earn a return on equity in the high-single or low-double digits. These returns are also helped by higher interest rates. In 2022, it was recorded that the net interest income for banks grew by 15%-20%.
Our Methodology
To select the stocks for our list, we scanned Insider Monkey’s database of 920 hedge funds’ holdings and picked 12 bank stocks with P/E ratios less than 20 as of January 19. The list is ranked based on the stocks’ P/E ratios, from the highest value for this metric to the lowest.
Cheap Bank Stocks To Buy
12. Cadence Bancorporation (NYSE:CADE)
Number of Hedge Fund Holders: 23
P/E Ratio as of January 19: 17.78
Cadence Bancorporation (NYSE:CADE) is a public company owned by BancorpSouth, Inc. The company is based in Atlanta. It has recently emerged as a new bank from a merger in 2022.
Morgan Stanley analyst Manan Gosalia initiated coverage of Cadence Bancorporation (NYSE:CADE) shares with an Equal Weight rating on December 5.
In the second quarter of 2022, Cadence Bancorporation (NYSE:CADE) saw an increase in its net interest income, which came in at almost $325 million, the highest figure it had ever reached. Morgan Stanley holds a $32 price target on the stock, representing significant upside potential from the stock’s current share price of $24.41.
Cadence Bancorporation (NYSE:CADE) was found among the 13F holdings of 23 funds in the third quarter of 2022, with a total stake value of $127 million.
Bernzott Capital Advisors, an investment management company, mentioned Cadence Bancorporation (NYSE:CADE) in its second-quarter 2022 investor letter. Here’s what the firm said:
“Cadence Bank (NYSE:CADE): Its merger of equals with BancorpSouth combines two long-standing franchises forming the sixth largest bank in its nine-state footprint in the attractive southeast market. The merger should offer revenue and cost synergies as the integration is executed over the coming quarters. This asset sensitive bank generates approximately one-third of revenues from feebased businesses such as wealth management and trust services which provides diversification and improves durability of financial results. The stock trades at a discount to peers and sports a 3.5% dividend yield.”
11. The Bank of New York Mellon Corporation (NYSE:BK)
Number of Hedge Fund Holders: 50
P/E Ratio as of January 19: 16.78
The Bank of New York Mellon Corporation (NYSE:BK) is a financial company based in New York. It operates through Securities Services, Market and Wealth Services, Investment and Wealth Management, and Other segments.
BofA’s Ebrahim Poonawala reinstated The Bank of New York Mellon Corporation (NYSE:BK) coverage on January 12 with a Buy rating.
In 2022, The Bank of New York Mellon Corporation (NYSE:BK) fell significantly to below $40. While it has recovered to an extent in 2023, the stock is still trading below analyst price targets. BofA holds a $56 price target on the stock, for instance, while the stock is still trading below $50. The company’s P/E ratio has also remained just below 17, showcasing its discounted price in the market.
There were 50 hedge funds long The Bank of New York Mellon Corporation (NYSE:BK) in the third quarter of 2022, with a total stake value of $3.3 billion.
The Bank of New York Mellon Corporation (NYSE:BK), like JPMorgan Chase & Co. (NYSE:JPM), Morgan Stanley (NYSE:MS), and Goldman Sachs Group, Inc. (NYSE:GS), is a bank stock with great potential, and many investors are piling into it today.
10. Wells Fargo & Company (NYSE:WFC)
Number of Hedge Fund Holders: 77
P/E Ratio as of January 19: 13.68
Wells Fargo & Company (NYSE:WFC) provides banking, investment, mortgage, and consumer and commercial finance products and services. It is based in San Francisco, California.
A Buy rating was reiterated on Wells Fargo & Company (NYSE:WFC) shares on January 18 by analyst Keith Horowitz at Citigroup.
Citigroup also raised its price target on Wells Fargo & Company (NYSE:WFC) shares on January 18 to $52, showing that analysts see upside potential in the stock. Wall Street’s 12-month average price target on the stock is about $55.
There were 77 hedge funds long Wells Fargo & Company (NYSE:WFC) in the third quarter of 2022. Their total stake value was $4.9 billion.
9. Truist Financial Corporation (NYSE:TFC)
Number of Hedge Fund Holders: 39
P/E Ratio as of January 19: 11.02
Truist Financial Corporation (NYSE:TFC) is a holding company based in Charlotte, North Carolina. The company provides banking and trust services in the Southeastern and Mid-Atlantic US.
Jefferies analyst Ken Usdin upgraded Truist Financial Corporation (NYSE:TFC) shares from Hold to Buy on January 9.
About five years ago, Truist Financial Corporation (NYSE:TFC) traded for 15x earnings. As of this December, it was trading at 7.9x 2023 earnings estimates of $5.26. The stock’s P/E also stands at just over 11, making the stock seem cheaply valued without a corresponding decrease in its business.
Truist Financial Corporation (NYSE:TFC) was found among the 13F holdings of 39 hedge funds as of the end of the third quarter. Their total stake value was $570 million.
ClearBridge Investments, an investment management firm, mentioned Truist Financial Corporation (NYSE:TFC) in its fourth-quarter 2021 investor letter. Here’s what the firm said:
“Weakness among disruptors was offset by solid results from companies that we consider evolving opportunities and steady compounders. These are companies that are misunderstood or temporarily mispriced and either maintain leading market positions in the case of compounders or are undergoing dynamic improvements in the case of evolving opportunities. We had been opportunistically adding to both groups while they have been cyclically depressed due to pandemic-related issues. Many of these names are now benefiting from improving economic conditions in addition to company-specific drivers. Among evolving opportunities, Truist Financial is realizing the benefits of a merger of two strong regional banks during the pandemic.”
Truist Financial Corporation (NYSE:TFC), like JPMorgan Chase & Co. (NYSE:JPM), Morgan Stanley (NYSE:MS), and Goldman Sachs Group, Inc. (NYSE:GS), is among the top bank stocks hedge funds are eyeing today.
8. U.S. Bancorp (NYSE:USB)
Number of Hedge Fund Holders: 52
P/E Ratio as of January 19: 10.83
U.S. Bancorp (NYSE:USB) is based in Minneapolis, Minnesota. The bank operates in corporate and commercial banking, consumer and business banking, wealth management and investment services, payment services, and treasury and corporate support segments.
On January 10, Erika Najarian at UBS upgraded U.S. Bancorp (NYSE:USB) shares from Neutral to Buy.
Currently trading at just over $45, U.S. Bancorp (NYSE:USB) seems to be cheap with a forward P/E of just over 10, which is below its normal P/E of 13.6. Wall Street analysts expect an EPS growth of 8%-15% annually for the stock over the next two years.
Out of the 920 hedge funds tracked by Insider Monkey in the third quarter of 2022, 52 funds were long U.S. Bancorp (NYSE:USB). Their total stake value was $4.8 billion.
7. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 97
P/E Ratio as of January 19: 10.44
Bank of America Corporation (NYSE:BAC) is one of the most renowned banks in the US, and it is based in Charlotte, North Carolina. The company offers banking and financial products to individual consumers, small- and middle-market businesses, institutional investors, corporations, and governments across the globe.
On January 10, Odeon Capital’s Dick Bove upgraded Bank of America Corporation (NYSE:BAC) shares from Hold to Buy.
Bank of America Corporation (NYSE:BAC) had 97 hedge funds long its stock in the third quarter of 2022. Their total stake value was $35.6 billion.
6. Huntington Bancshares Incorporated (NASDAQ:HBAN)
Number of Hedge Fund Holders: 23
P/E Ratio as of January 19: 10.77
Huntington Bancshares Incorporated (NASDAQ:HBAN) is the bank holding company for Huntington National Bank. It provides commercial, consumer, and mortgage banking services in the US, and is based in Columbus, Ohio.
On December 21, DA Davidson’s Peter Winter initiated coverage of Huntington Bancshares Incorporated (NASDAQ:HBAN) shares with a Neutral rating.
Wall Street analysts have an average price target of $16.21 on the stock, translating into a potential total return in the high teens. As such, Huntington Bancshares Incorporated (NASDAQ:HBAN) seems to be currently trading at a bargain compared to the value it can achieve.
There were 23 funds long Huntington Bancshares Incorporated (NASDAQ:HBAN) in the third quarter of 2022. Their total stake value was $168 million.
Aristotle Capital Boston, LLC, an investment advisor, mentioned Huntington Bancshares Incorporated (NASDAQ:HBAN) in its third-quarter 2022 investor letter. Here’s what the firm said:
“Huntington Bancshares Incorporated (NASDAQ:HBAN), an Ohio-based bank holding company, was removed from the portfolio based on our belief that shares were fully valued and there were better opportunities to deploy capital elsewhere within the portfolio.”
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Disclosure: None. 12 Cheap Bank Stocks To Buy is originally published on Insider Monkey.
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