The Zacks Analyst Blog Highlights: Atlantic Capital, Chemung, Middlefield Banc, Summit Financial And Univest Financial
Zacks Investment Research | Feb 07, 2019 10:32PM ET
For Immediate Release
Chicago, IL –February 8, 2019 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Atlantic Capital Bancshares, Inc. (NASDAQ:ACBI) , Chemung Financial Corp. (NASDAQ:CHMG) , Middlefield Banc Corp. (NASDAQ:MBCN) , Summit Financial Group, Inc. (NASDAQ:SMMF) and Univest Financial Corporation (NASDAQ:UVSP) .
Here are highlights from Thursday’s Analyst Blog:
Buy These 5 Small Banks to Boost Portfolio Gains
The Trump administration’s deregulatory measures brought much-needed relief to the U.S. banking industry last year. But banking stocks had a torrid time with the KBW Bank Index losing 20% in 2018. Fortunately, the index has staged a recovery this year, gaining 13%, boosted by strong results and substantial payouts to shareholders.
It is now clear that U.S. banks were the biggest beneficiaries of Trump’s tax cuts, with the largest of them shedding $21 billion from their tax bills. Also, for the first time since 2006, not a single bank failed last year. Small banks were among the biggest winners of deregulation and adding them to your portfolio would be prudent now.
Bank’s Reap $21B Tax Bonanza
President Trump’s $1.5 trillion tax cuts helped U.S. banks reduce their tax bills by $21 billion last year. This means that the banking industry benefited more than any other from these reductions.
And financial institutions aren’t just benefiting from a lower tax rate. An incrementally preferential treatment for pass-through companies is another tailwind for the industry. Incidentally, this category of companies largely consists of small banks.
Further, more than 70 banks have declared that they will hike wages or offers higher bonuses in the wake of the tax cut. This includes sector majors as well as community banks.
And the biggest beneficiaries of tax cuts were shareholders. This is because 23 of the country’s largest banks increased buybacks and dividends by $28 billion from 2017. Further, several of them have secured the Fed’s approval to boost payouts, which means investors are yet to reap the full benefit of these changes.
No Bank Failure in 2018, Small Banks Benefit From Deregulation
Not a single bank failure occurred in 2018, which demonstrates the robust health of the U.S. banking industry. This was the first such year since 2006 and only the third since 1933 that a year elapsed without a bank failure. This was largely attributable to strong economic growth, tax cuts and post-2008 financial rules which boosted bank safety.
And yet small banks have benefited the most from the passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act in May last year. Provisions related to mortgage lending, capital and data collection have been relaxed considerably.
This has improved both profitability and efficiency of smaller banking operations. Further, deregulation is unlikely since the House of Representatives is now dominated by Democrats. But regulators retain the power to ease business conditions for banks with smaller operations. On their part, bankers are going easy with daily supervision.
Our Choices
After enduring turbulent times last year, bank stocks are staging a welcome recovery. The impact of tax cuts is finally being felt, with banks set to offer more payouts to shareholders and employees alike. Additionally, the impact of the Trump administration’s deregulatory measures is likely to felt this year as well.
Small bank, tied up by post-crisis era regulations are breathing a sigh of relief. Many of them could be great additions to your portfolio. However, picking winning stocks may be difficult.
This is where our Zacks Investment Research
Get The News You Want
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.