U.S. midterm elections are coming up in less than a month, and the balance of power in Congress is at stake. Following President Donald Trump’s election in 2016, many investors thought bank stocks would benefit from deregulation, tax cuts and rising interest rates. Unfortunately for investors, those catalysts didn’t produce huge gains in bank stocks. Bank of America analyst Erika Najarian says bank stock investors need to be choosy these days. Here are eight bank stocks that could still outperform under Trump.
J.P. Morgan Chase & Co. (ticker: JPM)
J.P. Morgan has been one of the top-performing bank stocks over the past two years for good reason. The bank’s research team was just voted best equity research team by institutions for the third consecutive year, according to an Institutional Investor poll of more than 1,300 firms. Najarian says J.P. Morgan is firing on all cylinders but should still be able to generate double-digit earnings per share growth throughout the remainder of Trump’s first term thanks to aggressive share buybacks. Bank of America has a “buy” rating and $132 price target for JPM stock.
Wells Fargo & Co. (WFC)
Wells Fargo dealt with public relations issues and regulatory enforcement actions since its fraudulent accounts scandal several years ago, but the setbacks haven’t turned Najarian from the stock. The most recent issue, a $2.09 billion settlement with the Department of Justice stemming from legacy mortgage backed securities infractions dating back prior to the 2008 financial crisis, should not derail the bank’s commitment to buying back 10 percent of the stock’s market capitalization. Bank of America has a “buy” rating and $68 price target for WFC stock.
PNC Financial Services (PNC)
PNC has lagged the market in 2018, but Najarian says that trend could soon reverse course. Najarian expects PNC’s net interest margin to expand to 2.99 percent in 2019 as interest rates continue to rise. PNC’s pre-provision net revenue beat in the second quarter was a positive sign for investors that PNC is managing the relatively flat yield curve effectively. Najarian says the company has shifted focus away from acquisitions and toward improving Basel 3 capital levels and increasing capital returns. Bank of America has a “buy” rating and $168 price target for PNC stock.
Comerica Incorporated (CMA)
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