In a previous post, I wrote about some good bank stocks that you should consider investing in to get exposure to the financial sector of the stock market. Today I want to talk to you more about bank stocks, but this time focus on regional bank stocks.
Why regional bank stocks? Unlike national banks like Wells Fargo, regional bank stocks can be better investments. There are many reasons for this including:
- More targeted to a certain customer
- Ability to take part in prosperous regions
- Less red tape than a national bank
- Potentially better service and happier customers
Of course, some could argue negatives for regional bank stocks based on the same strengths that I listed above. But I feel that the 3 stocks I list below do have an advantage over national banks.
Let’s take a look at these 3 stocks and see which one makes sense for your portfolio.
3 Great Regional Bank Stocks
#1. First Hawaiian (NASDAQ: FHB)
First Hawaiian Bank is an interesting play. Because of the isolation of the state of Hawaii, First Hawaiian is in a position that controls banking in the state. In fact, they control 37% of deposits in the state.
And with little competition, they can set their own saving and lending rates without much pressure to get into a pricing war with other banks.
In their recent earnings release, First Hawaiian reported earnings per share of $0.41 which met expectations. Revenue hit $180 million, which missed estimates by $2.5 million. However, this was an increase of 8%.
As interest rates are expected to continue to rise, I expect revenues to continue to grow. The only downside to this stock is the inability to expand into new markets, again because of the isolation. Even so, I think this stock is a good investment.
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#2. M&T Bank (NYSE: MTB)
M&T first caught my attention when I heard that the company has not lost money in a quarter since 1976. That is impressive even without the housing and stock market collapse in 2008. But when you dig into that a little more, you realize why this stock is so solid.
They make smart decisions. They never got involved in the mortgage back securities that were the downfall of so many other banks. Because of this, M&T Bank is a great option for the long term investor.
When they released their latest earnings, earnings per share were $2.35, which beat estimates by $0.07. Revenue hit estimates of $1.4 billion, and this was a 7% increase.
The bank does its business in the northeastern part of the United States. With big cities and booming industry, the future of M&T looks solid. Add in the smart decision making by its leaders and its no wonder why this stock is a buy.
#3. First Republic Bank (NYSE: FRC)
Of the regional bank stocks listed, First Republic is my favorite. The reason is because of the markets and people it serves.
First Republic primarily does business in New York City, Los Angeles, Boston and Silicon Valley. This means they do a lot of banking with businesses and high net worth clients.
Based on statistics, high net worth people are excellent candidates for loans as they rarely default. Because of this, First Republic can offer extremely attractive interest rates on loans.
In the latest earnings release, First Republic had earnings per share hit $1.06 which missed estimates by $0.03. Revenues were $641 million, another miss by $25 million. However, revenue did increase by 20%.
Overall, this bank has a bright future ahead of it based on where it does business and with whom it does business with.
Overall these 3 regional bank stocks have a lot going for them. In the coming quarters and years, I see them continuing to perform well and as a result, expect their stock prices to rise.
The only major downside risk is another collapse of the market. But this time it won’t be fueled by the banks. As a result, any pull back will be a great opportunity to buy more shares at a hefty discount.
This author has no positions in any stock mentioned and does not plan to open any positions in any stocks mentioned for at least 72 hours after publication of this article.