Bank stocks have been on fire since Election Day, and for good reason. Since the financial crisis in 2008, it has been a tough road for banks in the U.S. Historically low interest rates coupled with unprecedented federal regulations have made it nearly impossible for banks to grow their earnings. Banks have been forced to boost capital ratios during a time when net interest margins have been their thinnest in history.
However, the lean times forced banks to cut every last cent of costs and shore up their balance sheets to comply with new regulations. Now that the banks are running like well-oiled machines, Donald Trump’s election will potentially open up a floodgate of bank earnings.
The Federal Reserve is likely looking to continue raising interest rates on a regular basis. Trump has promised to ease corporate regulations across the board. And finally, a Republican in the White House and a Republican-controlled Congress likely means major corporate tax cuts will be on the way soon.
There’s no question bank stocks are more expensive than they were just a couple of months ago. However, there may be plenty more upside in certain regional banks, considering a new cycle of bank earnings growth has likely just begun.
Bank Stocks You Don’t Want To Overlook: BB&T (BBT)
BB&T Corporation (NYSE:BBT) has been making all the right moves throughout the down cycle for banks and is well positioned to be one of the major beneficiaries of a more favorable environment in coming years. Even when organic revenue growth was hard to come by, BBT aggressively grew its business via acquisitions such as Bank of Kentucky Financial and Susquehanna Bancshares.
The stock is up 16.4% since Election Day, but long-term investors shouldn’t let that rise scare them away. BBT stock is still a solid value. Its forward price-to-earnings ratio is under 15, and its net interest income is up 17.9 percent since mid-2015. Now that interest rates are rising, that growth should really begin to take off.
BBT stock also pays a relatively high 2.6% dividend, which the company boosted another 7% last year.
BB&T reports earnings on Jan. 19. Long-term investors shouldn’t sweat the fourth-quarter numbers because things are looking up for BBT regardless of a Q4 beat or miss. Any post-earnings dip could especially be a buying opportunity.
Bank Stocks You Don’t Want To Overlook: Fifth Third Bancorp (FITB)
Fifth Third Bancorp (NASDAQ:FITB) is…
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