3 Bank Picks As Powell Soothes Market Concerns Over Taper Moves
Zacks Investment Research | Dec 01, 2021 08:57PM ET
Jerome Powell, the newly-renominated U.S. Federal Reserve chair, yesterday appeased the market's reaction over his previous comments on ending its asset purchases a few months early. He indicated that the Fed's bond-buying program's winding down will not cause havoc to the financial markets. The faster pace of tapering will position the Fed to raise interest rates in mid-2022 if higher inflation continues to prevail.
A higher interest rate will set a stage for recovery for banks. Hence, it might be prudent to invest in bank stocks with a favorable Zacks Rank. Here are such stocks — Southside Bancshares (NASDAQ:SBSI), Inc. .
The chart below shows the price performance of our three picks in the past three months.
Southside Bancshares: Southside Bancshares is headquartered in Tyler, TX, with $7.14 billion in assets as of Sep 30, 2021. The company offers consumer and commercial loans, mortgages, deposit accounts, safe deposit boxes, treasury management, wealth management, trust services, brokerage services, and an array of online and mobile services through its 55 branches.
In the third quarter, Southside Bancshares' deposit and loan growth, net of Paycheck Protection Program loans, were 13.5% and 7.9%, sequentially. NIM of 2.96% increased from 2.83% year over year. Macro conditions in SBSI's markets (Dallas/Fort Worth and Austin areas) remain strong, enabling the company to see a healthy loan pipeline. Going forward, economic growth is expected to aid loan growth.
Since Southside Bancshares traditionally had a liability-sensitive balance sheet, management has taken appropriate steps to reduce the liability sensitivity in anticipation of a rate hike. In the third quarter, SBSI saw an increase in non-maturity deposits, low cost-interest bearing liabilities. Also, in the past year, SBSI has increased non-maturity deposits, facilitating a reduction in higher-cost funding avenues like time deposits and FHLB borrowings.
Southside Bancshares' 2021 earnings are expected to witness 34.1% year-over-year growth. The Zacks Consensus Estimate for 2022 improved 32% over the last 30 days. Southside Bancshares has a P/E F1 ratio of 9.53, lower than the finance sector's 13.98. This Zacks Rank #1 company has a market cap of $1.32 billion.
Hancock Whitney: Gulfport, MS-based Hancock Whitney offers banking operations and services, including a variety of transaction and savings deposit products, commercial and small business banking, private banking, trust and investment services, healthcare banking, mortgage banking, and certain insurance services. HWC remains focused on its revenue growth strategy. Its strategic investments in growth and new markets are expected to bolster the top line and help achieve an efficiency ratio of 55% by the end of fourth-quarter 2022.
Hancock Whitney's revenues (on a tax-equivalent basis) witnessed a compound annual growth rate (CAGR) of 7.9% over the last six years (2015-2020), with the momentum continuing in the first nine months of 2021. Going forward, robust economic growth and a gradual rise in demand for loans will support the top line.
Capital deployment activities are also encouraging. Hancock Whitney had 4.1 million shares remaining under the authorization as Sep 30, 2021, which is set to expire on Dec 31, 2022. Given a decent liquidity position and earnings strength, the company is expected to sustain efficient capital deployments.
Hancock Whitney has an expected earnings growth rate of a whopping 760% for the current year. The Zacks Consensus Estimate for HWC's 2022 earnings improved 2.3% over the last 30 days. Hancock Whitney has a P/E F1 ratio of 9.53, lower than the finance sector's 15.57. This Zacks Rank #2 company has a market cap of $4.1 billion.
HomeStreet: HomeStreet is a diversified commercial and consumer bank headquartered in Seattle, WA, with $7.4 billion in assets as of Sep 30, 2021. HomeStreet has made significant strides to transform itself into a full-scale commercial bank by expanding its market presence in highly attractive metropolitan markets.
Also, the company sold a major chunk of its mortgage business in 2019. Such an evolving business model has helped HMST reduce earnings volatility, given the choppiness in the mortgage market. HomeStreet's contribution of revenues from single-family mortgage banking reduced from 26% in third-quarter 2020 to 17% in third-quarter 2021. Given the expectation of a slight decline in origination and gain on sale activities, revenues from mortgage are expected to be an even smaller share of HomeStreet's revenues, going forward.
In third-quarter 2021, the company's NII and NIM were relatively stable at $57.5 million and 3.42%, respectively. HMST also has a highly diversified loan portfolio in terms of product and geography. Management expects 10-15% of loan growth in 2022 and, thereafter, primarily driven by higher commercial real estate loan originations. This also corresponds to an increase in NII, which is likely to drive top-line growth.
HomeStreet's 2021 earnings are expected to witness 52.7% year-over-year growth. The Zacks Consensus Estimate for 2022 improved 2.7% over the last 30 days. HomeStreet has a P/E F1 ratio of 9.53, lower than the finance sector's 10.54, which seems unjustified, given the low earnings volatility. This Zacks Rank #2 company has a market cap of $1.01 billion.
Get The News You Want
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
Download FREE: How to Profit from Trillions on Spending for Infrastructure >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Zacks Investment Research
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.