In this article, we are going to discuss the 10 best bank stocks to buy amid rising inflation.
As global inflation and recession fears continue to mount, investors are flocking to bank stocks since they are known to thrive during rising interest rate environment. Stocks such as JPMorgan Chase & Co. (NYSE:JPM), Bank of America Corporation (NYSE:BAC), and Wells Fargo & Company (NYSE:WFC) are also gaining ground since they offer regular dividends.
Bank of America strategists led by Savita Subramanian recently kept a positive point of view towards the financial sector. They endorsed an Overweight rating on the sector along with energy and healthcare.
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Our Methodology
We selected some of the most popular bank stocks among the 912 hedge funds tracked by Insider Monkey. We gave preference to dividend payers and those that have strong fundamentals and reliability.
Best Bank Stocks to Buy Amid Rising Inflation
10. HSBC Holdings plc (NYSE:HSBC)
Number of Hedge Fund Holders: 16
HSBC Holdings plc (NYSE:HSBC) is one of the biggest banks in Europe in terms of total assets worth $2.958 trillion as of December 2021.
On June 15, HSBC Holdings plc (NYSE:HSBC) was upgraded to Buy from Hold with a price target of $685.83 by Investec analyst Ian Gordon.
Rising interest rates benefit banks and increase their net interest income. Redburn analyst Fahed Kunwar recently upgraded HSBC to Buy from Neutral.
In the first quarter of 2022, the hedge fund sentiment towards HSBC Holdings plc (NYSE:HSBC) was positive as per the database of Insider Monkey. 16 funds were stakeholders in the firm, compared to 10 in the fourth quarter of 2021.
HSBC Holdings plc (NYSE:HSBC) along with JPMorgan Chase & Co. (NYSE:JPM), Bank of America Corporation (NYSE:BAC), and Wells Fargo & Company (NYSE:WFC) are the best bank stocks to buy amid rising inflation.
9. First Republic Bank (NYSE:FRC)
Number of Hedge Fund Holders: 19
First Republic Bank (NYSE:FRC) along with its subsidiaries offers various banking services. According to the database of hedge funds tracked by Insider Monkey, Select Equity Group is the biggest stakeholder in First Republic Bank (NYSE:FRC) with approximately 5 million company shares worth $811 million.
On April 13, First Republic Bank (NYSE:FRC) declared a quarterly dividend of $0.27 per share and the forward yield was 0.79%. The company has been paying a growing dividend to the stakeholders for the past nine years.
First Republic Bank (NYSE:FRC) has displayed top-line strength and remains one of the best bank stocks to invest in during inflation. The company’s NII had a four-year CAGR of 18% and growth in non-interest income was 19.2% from 2018 to 2021. Moreover, the firm’s earnings growth rate in the last three to five years is 13.96%, compared to the industry average of 10.67%. Lastly, the company’s loan balances and total deposits witnessed a three-year CAGR of 22% and a CAGR of 31.7% from 2019 to 2021, respectively.
First Republic Bank (NYSE:FRC) was mentioned by Wedgewood Partners in its first-quarter 2022 investor letter. Here is what it said:
“First Republic Bank continued its streak of +20% loan growth – well above the banking industry. First Republic’s differentiated high-touch strategy with clients is in stark contrast to the Company’s low-touch, internet-obsessed competitors. First Republic’s culture has been an important driver of its growth over the years, so it is not a surprise that the stock reacted negatively to executive turnover during the quarter. However, much of the leadership that made the Company successful over the past several decades continues to be intact. As interest rates have skyrocketed – at least relative to 2020’s lows – we would expect the Company’s mortgage refinance business to slow, but home purchases to pick up as First Republic has seen during the past couple periods of rising rates. Furthermore, we are optimistic that a more normalized monetary policy environment, vis-à-vis the Federal Reserve’s unwinding of its $9 trillion balance sheet, could finally allow for healthier rates of return on actual loans.”
8. Huntington Bancshares Incorporated (NASDAQ:HBAN)
Number of Hedge Fund Holders: 26
Huntington Bancshares Incorporated (NASDAQ:HBAN), a Fortune 500 company, is a bank holding company that offers services like commercial, consumer, and mortgage banking services. In the first quarter of 2022, Huntington Bancshares Incorporated (NASDAQ:HBAN) posted an EPS of $0.32, outmatching the estimates of $0.30. The firm’s revenue also surprised the estimates of $1.63 billion by 1.04% after generating $1.65 billion with a 20.34% YoY growth.
The capital market fees of Huntington Bancshares Incorporated (NASDAQ:HBAN) grew by 15.8% every year between 2017 to quarter one of 2022. In June, the company acquired Capstone Partners. It is set to add $96 million to Huntington Bancshares Incorporated (NASDAQ:HBAN)’s projected capital market fees of $168 million this year.
On June 17, the board of directors of Huntington Bancshares Incorporated (NASDAQ:HBAN) announced a quarterly cash dividend for the 5.70% Series I Non-Cumulative Perpetual Preferred Stock (NASDAQ:HBANM) at $356.25 per share to shareholders of record August 15, 2022. It will be paid out on September 1, 2022.
In the first quarter of 2022, 26 hedge funds were bullish on Huntington Bancshares Incorporated (NASDAQ:HBAN) as per the database of Insider Monkey. The combined stake of the funds was more than $169.9 million.
7. Regions Financial Corporation (NYSE:RF)
Number of Hedge Fund Holders: 30
Regions Financial Corporation (NYSE:RF) is a Fortune 500 bank holding company that offers services to individual and corporate customers. In April, the board of directors greenlit stock repurchase of up to $2.5 billion for the duration of the second quarter of 2022 till the fourth quarter of 2024. As of June 24, the company’s forward dividend yield is 3.69% and P/E ratio is 8.31.
In the last 20 years, Regions Financial Corporation (NYSE:RF) has proven that it is one of the best bank stocks to buy amid rising inflation because it outperforms the market during difficult times. In 2004, when the interest rate was raised, Regions Financial Corporation (NYSE:RF) had a 23.3% total return compared to the total return of the S&P 500 which was 8.99%. Further on, when the FED raised the interest rates from 0.5%, the return of S&P 500 was 19.24% while Regions Financial Corporation (NYSE:RF) had a total return of 56.06%, including dividends.
On June 15, Truist analyst Jennifer Demba maintained a Buy rating on Regions Financial Corporation (NYSE:RF) stock and lowered the price target from $27 to $25.
6. M&T Bank Corporation (NYSE:MTB)
Number of Hedge Fund Holders: 40
M&T Bank Corporation (NYSE:MTB) is a bank holding company that provides retail and commercial banking, trust, wealth management, and investment services. As of June 24, the stock has gained 12.43% over the last twelve months, has a forward P/E ratio of 11.03, and a forward dividend yield of 3.01%.
In the first quarter of 2022, out of the 912 hedge funds tracked by Insider Monkey, 40 hedge funds held stakes worth $1.06 billion in M&T Bank Corporation (NYSE:MTB), compared to 37 funds in the preceding quarter.
On June 17, Baird analyst David George upgraded the rating of M&T Bank Corporation (NYSE:MTB) to Outperform from Neutral and raised the price target to $200 from $175.
In April 2022, M&T Bank Corporation (NYSE:MTB) completed its acquisition of People’s United Financial (PBCT) which is likely to result in cost savings of $330 million by early 2023 and growth in earnings. Amid the rising inflation and the resultant interest rate hike, the company is one of the best bank stocks to buy due to its recent acquisitions, which will lead to an improvement in the company’s net income interest (NII) in the next quarters.
Like M&T Bank Corporation (NYSE:MTB), investors are flocking to income and defensive plays such as JPMorgan Chase & Co. (NYSE:JPM), Bank of America Corporation (NYSE:BAC), and Wells Fargo & Company (NYSE:WFC) as inflation rises.
5. Fifth Third Bancorp (NASDAQ:FITB)
Number of Hedge Fund Holders: 41
Fifth Third Bancorp (NASDAQ:FITB) offers diverse services like financial and banking services, consumer lending services, retail & commercial banking, and investment advisory services. On June 14, the firm announced a quarterly dividend of $0.30 per share for the shareholders of record June 30, payable on July 15.
In the first quarter of 2022, Kenneth C. Griffin’s Citadel Investment Group had the biggest stake in Fifth Third Bancorp (NASDAQ:FITB) with more than 4.3 million company shares worth $187.8 million. The hedge fund increased its activity in the company by 9390% compared to the preceding quarter.
According to the database of Insider Monkey that tracks 912 elite hedge funds, 41 funds were bullish on Fifth Third Bancorp (NASDAQ:FITB) with a combined stake value of $617.5 million, compared to 31 funds in the prior quarter.
On June 17, Fifth Third Bancorp (NASDAQ:FITB)’s shares were upgraded Outperform from Neutral with a price target of $44 by Baird analyst David George.
4. Capital One Financial Corporation (NYSE:COF)
Number of Hedge Fund Holders: 56
Capital One Financial Corporation (NYSE:COF), a Fortune 500 company, operates as a bank holding company through various segments: credit card, consumer banking and commercial banking. As of June 20, the firm has a forward P/E ratio of 5.34 and a forward dividend yield of 2.24%.
In 2021, Capital One Financial Corporation (NYSE:COF) repurchased shares worth $7.5 million. The company announced a buyback plan of $5 billion in January 2022. On April 1, the board of directors authorized a further share repurchase of $5 billion which will begin in the third quarter of 2022.
On June 17, Capital One Financial Corporation (NYSE:COF) was upgraded to Outperform from Neutral by Baird analyst David George.
Davis Funds mentioned Capital One Financial Corporation (NYSE:COF) in its fourth-quarter 2021 investor letter. Here is what it said:
“The absolute level of revenues and profits generated by such companies is in fact so large that most of the major financial holdings in the portfolio produce enough annual operating income individually that a number of them could, in theory, purchase several entire businesses among hundreds of choices within the S&P 1500 Index, using just a year’s cash earnings without dipping into capital. This is theoretical, as financial companies would not be in the business of buying healthcare or technology companies, for example, but we point out these facts to illustrate the sheer scale of the economics produced by single financial companies in a given year, which is often a multiple of the cash earnings yielded by companies in a host of other industries.
Given this cash-generation power, we are naturally drawn to what we believe are strong and profitable financial institutions when the price is right. Presently, we believe the valuations of our financial holdings are not only reasonable, but extremely compelling, and our portfolio composition reflects this view. Representative financial holdings in the Fund includes Capital One Financial.”
3. Wells Fargo & Company (NYSE:WFC)
Number of Hedge Fund Holders: 93
Wells Fargo & Company (NYSE:WFC) is another multinational Fortune 500 company that provides diverse services of consumer and commercial finance, banking, mortgage products and services, insurance, and investments. On April 26, the firm announced a quarterly dividend of $0.25 per share, payable on June 1 to shareholders of record June 5. The forward dividend yield of Wells Fargo & Company (NYSE:WFC) is 2.64%.
Amid the rising inflation and mortgage rates, the company is set to profit as the firm relies mostly on U.S. retail and commercial banks. The Q1 2022 earnings report showed that the average loans come up to $898 billion, up by 3% from last year.
On April 18, Barclays analyst Jason Goldberg increased the price target on the stock to $64 from $62 and maintained an Overweight rating.
Investment management firm Davis Funds mentioned Wells Fargo & Company (NYSE:WFC) in its fourth-quarter 2021 investor letter. Here is what it said:
“The absolute level of revenues and profits generated by such companies is in fact so large that most of the major financial holdings in the portfolio produce enough annual operating income individually that a number of them could, in theory, purchase several entire businesses among hundreds of choices within the S&P 1500 Index, using just a year’s cash earnings without dipping into capital. This is theoretical, as financial companies would not be in the business of buying healthcare or technology companies, for example, but we point out these facts to illustrate the sheer scale of the economics produced by single financial companies in a given year, which is often a multiple of the cash earnings yielded by companies in a host of other industries.
Given this cash-generation power, we are naturally drawn to what we believe are strong and profitable financial institutions when the price is right. Presently, we believe the valuations of our financial holdings are not only reasonable, but extremely compelling, and our portfolio composition reflects this view. Representative financial holdings in the Fund includes Wells Fargo.”
2. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 99
Bank of America Corporation (NYSE:BAC), one of the Big Four banking institutes of the U.S., is a financial and bank holding company. In the first quarter of 2022, the biggest shareholder in Bank of America Corporation (NYSE:BAC) was Warren Buffett’s Berkshire Hathaway Inc.
On June 24, Morgan Stanley analyst Betsy Graseck maintained an Equal Weight rating on Bank of America Corporation (NYSE:BAC)’s stock and lowered the price target from $49 to $47.
Based on the database of Insider Monkey that tracks 912 funds, 99 hedge funds had shares in Bank of America Corporation (NYSE:BAC) worth $45.4 billion in the first quarter of 2022. The hedge fund sentiment is positive as 84 funds held stakes in the previous quarter.
The PEG ratio of Bank of America Corporation (NYSE:BAC) is 1.30 while its industry has a PEG ratio of 1.36. The corporation repurchased $25 billion of common stock in 2021. In early April, the board of directors announced a regular quarterly cash dividend of $0.21 to be payable on June 24.
Here is what Aristotle Capital Management said about Bank of America Corporation (NYSE:BAC) in its first-quarter 2022 investor letter:
“We first invested in Bank of America during the second quarter of 2013. During our near decade as investors, Bank of America closed the chapter on the legacy issues from acquired Countrywide, including mortgage write-downs and substantial legal charges. In addition, it successfully turned the Merrill Lynch franchise into one of the leading U.S. brokerage and advisory firms. Thanks to what we consider to be a strong management team led by CEO Brian Moynihan, the bank went through years of simplification, improved its cost structure and efficiency ratio, and reduced risk. While we believe Bank of America remains a much-improved market leader, we decided to exit our position and use the proceeds to invest in Brookfield Asset Management.”
1. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Fund Holders: 110
JPMorgan Chase & Co. (NYSE:JPM), the largest bank in the world in terms of market capitalization, is involved in providing investment banking and financial services. One of the Big Four banks in America, the company has a market cap of $343.87 billion as of June 24.
On May 24, JPMorgan Chase & Co. (NYSE:JPM) was upgraded to Buy from Hold and the price target was raised to $150 from $145 by Societe Generale analyst Andrew Lim, who cited positive guidance regarding the net interest income, investment bank trading revenues, and credit quality.
The hedge fund sentiment toward JPMorgan Chase & Co. (NYSE:JPM) is positive as 110 hedge funds were bullish on the company in the first quarter of 2022, compared to 107 in the last quarter.
JPMorgan Chase & Co. (NYSE:JPM) has a forward P/E ratio of 10.16 compared to its industry’s average forward P/E ratio of 9.47.
According to the database of Insider Monkey that tracks 912 elite hedge funds, the biggest stakeholder in JPMorgan Chase & Co. (NYSE:JPM) is Ken Fisher’s Fisher Asset Management with 7,760,086 shares worth $1.05 billion, making up 0.62% of the hedge fund’s portfolio.
JPMorgan Chase & Co. (NYSE:JPM) was mentioned in ClearBridge Investments’ fourth-quarter 2021 investor letter. Here is what it said:
“Our energy and financials holdings kept pace in the 2021 rally. In financials, JPMorgan benefited from strong economic growth, a rise in Treasury yields, and a benign credit environment.”
You can also take a peek at the 12 Best American Stocks To Buy in 2022 and 10 Cheap Chinese Stocks To Buy.
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Disclose. None. 10 Best Bank Stocks to Buy Amid Rising Inflation is originally published on Insider Monkey.
