After the housing meltdown of 2008, financial stocks and banks in particular took a beating. Even those that had strong balance sheets were affected by those who had millions in bad loans. It took many of these bank stocks years to recover to pre-crash prices and even longer to go higher.
But now that the dust has settled and banks are more cautious about lending, there are some bank stocks that you should take a look at. Add in the fact that the Federal Reserve is raising interest rates this year, bank profits should be aided by this as well.
Let’s take a look at 4 bank stocks that have solid foundations to potentially invest in.
4 Bank Stocks You Should Consider Investing In
#1. BB&T Corporation (NYSE: BBT)
BB&T is a regional bank stock that operates in 15 states, mainly in the eastern half of the United States. Historically BB&T has been a solid performer given its conservative lending practices. As such, the balance sheet of the bank has remained healthy. And with cash on hand, the bank has been on a buying spree, snapping up other regional banks to increase its footprint.
As far as financials go, this stock is rock solid. Adjusted earnings growth is expected to be in the upper single digits going forward and as the company grows its investment management business, they should see an added increase to revenue and profits.
And with the recent purchases of other banks, as the company take a stronger foothold in these new regions, you can expect income to increase and the stock price to follow suit.
#2. Bank of America (NYSE: BAC)
Back during the financial crisis, it was a good bet to think that Bank of America would no longer be around. It was on the verge of collapse when the government stepped in to bail the bank out. In the years since, Bank of America not only has paid back the government, but has seen its customers stick with them as well and thrived.
Profit for the bank jumped 14% in 2016 and is expected to increase another 16% in 2017. This of course is partly due to increased interest rates. But there is something that is not accounted for in profits or the stock price for that matter. President Trump.
President Trump has talked about scaling back financial regulations which would benefit Bank of America. In addition to this the President’s push for stronger U.S. growth. Right now, Bank of America earns 88% of its revenues from within the U.S. A stronger than expected economy could bump the stock price even higher.
#3. Wells Fargo (NYSE: WFC)
You probably know a lot about Wells Fargo, especially since they have been in the news recently for opening fake accounts. Looking beyond this, Wells Fargo is the most profitable bank in the United States.
It made it through the financial crisis mainly by being conservative with its lending practices at the time. As a result of this, it was able to buy Wachovia Bank at a steep discount, allowing Wells Fargo to increase its presence in the Eastern United States.
When Wells Fargo reported earnings in January, they missed on a number of fronts, but there was some good news sprinkled in. First, net interest margin grew close to 3%, signaling an increase in new loans. Return on equity was also positive, rising 11.49%.
While the bank did miss its earnings forecast, there is nothing to think this will continue. In fact, many agree that the opposite will happen 2017 and the bank will get back to its growing ways.
#4. Bank of The Internet (NASDAQ: BOFI)
When online banking first took off, Bank of The Internet was there. After many years, even before the financial crisis, many of the online only banks disappeared or were bought out. Then came the housing bubble and most of the online banks left standing crumbled. Except for Bank of The Internet.
The bank didn’t come close to going under. In fact, its story is the opposite. It has thrived. What makes it stand out is that it is an online only bank. So it has much less overhead than traditional banks. No salaries for tellers. No purchasing real estate and setting up branches in a geographical location. The bank is able to do business throughout the United States.
And with low overhead comes more competitive rates, both on loans and savings products. Because of this, the bank has been growing earnings per share by 34% on an annualized basis since 2013. If that didn’t get your attention, they have also been able to grow their return on equity at close to 20%.
There is no signs of Bank of The Internet slowing down either. With the current dip in its stock price, now could be the perfect time to get in on this bank stock.
Overall, bank stocks look like a good place to invest in. With the housing market still strong through most of the country, banks will be able to continue lending money. And with rising interest rates, they will be earning more on those loans as well.
Added to this, since banks take a longer time to raise interest rates on the savings accounts they offer, banks should see a nice bump in revenue.
These 4 stocks are in my opinion, the best of the bunch and should get your attention before any others in the industry.
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.