5 Bank Stocks Set to Rebound With Vaccine-Driven Economic Recovery
The largely turbulent year is finally ending optimistically. The introduction of the coronavirus vaccine has instilled confidence in the resumption of normal activities, thus helping the economic recovery. It has also created the conditions for bank stocks to experience a strong rebound in 2021.
Robert Redfield, director of the Centers for Disease Control and Prevention, said more than a million Americans have already received their first dose of vaccine. The government aims to have 100 million people vaccinated by the end of the first quarter of 2021 and an additional 100 million by the second quarter. In this regard, the U.S. government yesterday announced a second agreement with Pfizer PFE and BioNTech BNTX to purchase an additional 100 million shots, which are expected to ship by July 2021.
In particular, Moderna MRNA received approval from the U.S. Food and Drug Administration last week for the COVID-19 emergency for people 18 years and older. In addition, a third vaccine from Johnson & Johnson JNJ could be approved as early as next month, according to an article by Livemint.
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Since the markets were filled with positive vaccine data in November, the SPDR S&P Regional Banking ETF and KBW Nasdaq Bank Index have risen 22.2% and 22.7%, respectively, in bullish investor sentiment about banks' growth prospects reflects. The Zacks Major Regional Banks and Zacks Banks & Thrifts industries also gained 25.9% and 21.6%, respectively, outperforming the 12% rally for the S&P 500 index over the same period.
Is the worst over?
Despite adherence to social distancing norms, the use of masks, and greater awareness of the virus, cases remain at record levels. According to the Covid Tracking Project, the numbers have risen sharply since November. The 7-day average of new daily cases peaked at 235,503 hospital admissions and 2,649 deaths on December 23 at 207,824.
Meanwhile, the discovery of a new strain of COVID-19 has made us concerned about the effectiveness of vaccines in the face of the ongoing pandemic. This new variant, first discovered in England, has already spread to a few other countries and has resulted in several nations imposing travel restrictions from the UK.
However, a CNN report found that Pfizer / BioNTech and Moderna were testing their coronavirus vaccines against the new mutated version. Scientists are also pretty confident that these vaccines can target the new variant as well.
How Vaccine News drives bank stocks
As more vaccines are distributed, the chances of economic recovery increase due to lower uncertainties, which improves consumer confidence and enables normal activities to be restored.
The vaccine-driven economic recovery is expected to increase demand for credit as people are likely to return to investing in businesses and other needs. This will increase banks' net interest income despite low interest rates and to some extent support profitability.
Capital market activities are also improving, as is evident from the increasing number of announced deals and increasing number of IPOs. Advisory revenues are likely to be an important aid to the banks' fee income on this account.
In addition, Congress recently passed the $ 900 billion COVID-19 stimulus package, which is likely to help banks recover from the uncertainty over credit losses that caused them in the first three quarters of 2020, Build up reserves in the billions.
In particular, major US banks have completed the second round of stress tests, which largely reflect the stability of the banking system. With this in mind, banks have been allowed to resume share buybacks from next year and keep dividends at current levels.
Despite positive developments in dealing with this health crisis, the pandemic will continue for a while. Cases continue to be reported as the vaccine may take some time to distribute globally. However, investors looking to invest can generally keep an eye on strong bank stocks.
5 bank stocks are set to rally in 2021
JPMorgan JPM: JPMorgan is headquartered in New York and one of the largest banks with assets of $ 3.25 trillion. Earnings are expected to grow 17.1% in 2021. Additionally, the Zacks consensus estimate for the next year has been revised up 2% over the past 60 days.
The lender continues to expand its presence in new regions by opening branches. The bank plans to open 15 to 20 new markets by the end of 2022 by opening around 400 new branches. The company has already made progress in this area, with nearly 120 new offices added to date, and plans to increase that number to over 150 by the end of this year.
After the Fed's second hour of stress and subsequent approval, the company will resume buybacks in the first quarter of 2021. For 2021, it has approved the repurchase of shares valued at up to $ 30 billion.
Since November, the company's shares are up 24.8%. It currently has a Zacks Rank 1 (Strong Buy). The full list of today's Zacks # 1 Rank stocks can be found here.
Bank of Hawaii Corporation BOH: Headquartered in Honolulu, HI, the bank provides a wide range of products and services in Hawaii, Guam and other Pacific Islands.
Organic growth remains a key strength for the Bank of Hawaii, which is reflected in its revenue growth story. In addition, the low-cost source of funding - non-interest bearing deposits - which accounts for more than 29% of total deposits, is expected to increase net interest income and margin. We therefore believe that the company is well positioned to maintain the rising sales trend over the coming days.
Bank of Hawaii earnings are projected to increase 10.8% in 2021. Additionally, analysts appear optimistic about the company's earnings growth outlook. As a result, the Zacks consensus estimate for the 2021 result has been revised upwards by 5.1% over the past 60 days.
The stock currently has a Zacks rank 2 (Buy). Since the positive vaccine development in November, its shares have increased by 26.3%.
Bank OZK OZK: The company is currently ranked Zacks # 1 and its shares are up 23.5% since the beginning of November. Bank OZK, headquartered in Little Rock, AR, provides a wide range of private and commercial banking services to corporations, individuals, and nonprofit and government agencies.
Bank OZK has grown considerably both through the de novo branch strategy and inorganically. With a robust liquidity position and decent profitability, the bank should remain able to meet its debt obligations in the near future.
With the economy improving through vaccines, the bank should benefit from a better credit scenario and benefit from pent-up consumer demand.
The company's earnings growth of 41.3% is forecast for 2021. Additionally, the Zacks consensus estimate for the 2021 result has been revised up 8.8% over the past 60 days.
UMB Financial Corporation UMBF: UMB Financial Corporation, headquartered in Kansas City, MO, provides banking and asset services in the United States.
The company has focused on diversifying its business into non-interest bearing revenue streams to reduce interest rate risk and offset the unprecedented risks associated with the interest rate environment.
The capital ratios also remain well above the required level. We believe that having a strong capital position will help make opportunistic expansions in the future. The capital strength also supports the company's plan to invest in technology, which could result in leverage in the short term.
For 2021, earnings growth of 2.2% is forecast for UMB Financial. Additionally, analysts appear optimistic about the company's earnings growth outlook. Therefore, the Zacks consensus estimate for the 2021 result has been revised upwards by 18.8% over the past 60 days.
The stock currently ranks 2nd in Zacks. Since November, its shares have gained 12.2%.
Synovus Financial Corp. SNV: Synovus Financial Corp. headquartered in Columbus, GA, is a diverse financial services company that conducts its banking business through Synovus Bank. It provides integrated financial services to its clients, including commercial and retail banking, financial management, insurance and mortgage services.
Earnings are expected to grow 37.7% in 2021. In addition, the Zacks consensus estimate for next year has been revised up 3.2% over the past 60 days.
Due to its solid liquidity position, Synovus has made strategic investments through mergers and acquisitions. In May 2019, the transition from FCB Financial Holdings was completed. By 2020, pre-tax synergies of around USD 40 million should be fully exploited. In addition, the company looks forward to taking advantage of similar opportunities in the future.
The company's credit balance also saw an average annual growth rate of 13.5% over the past five years (2015-2019), largely propping up net interest income. With an expected recovery in 2021, Synovus' loan balance could continue to rise and support revenue growth.
Since November, the company's shares are up 23.6%. It currently has a Zacks rank 2.
Zack's top 10 stocks for 2021
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JPMorgan Chase & Co. (JPM): Free Stock Research Report
Johnson & Johnson (JNJ): Free Stock Analysis Report
Pfizer Inc. (PFE): Free Stock Research Report
Moderna, Inc. (MRNA): Free Stock Research Report
Synovus Financial Corp. (SNV): Free stock analysis report
UMB Financial Corporation (UMBF): Free Stock Analysis Report
Bank of Hawaii Corporation (BOH): Free Stock Analysis Report
Bank OZK (OZK): Free Stock Analysis Report
BioNTech SE Sponsored ADR (BNTX): Free Stock Analysis Report
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