Citi analyst Keith Horowitz has recently initiated coverage of several major regional banks, providing positive ratings for Huntington Bancshares, Zions Bancorp, and KeyCorp. As the third quarter for bank stocks comes to an end, Horowitz believes that the sector presents an attractive entry point for investors.
Transitioning from Late-Cycle to Early-Cycle
In a research note, Horowitz shares the view that the ideal time to invest in bank stocks is during the transition phase from late-cycle to early-cycle. He believes that during this period, credit performance will be more favorable compared to market concerns. This insight demonstrates Horowitz’s confidence in the sector’s growth potential.
Citi’s Recommendations
Citi’s coverage includes buy ratings for Huntington Bancshares Inc. (HBAN) and Zions Bancorp (ZION), and neutral ratings for New York Community Bancorp Inc. (NYCB) and First Citizens Bancshares Inc. (FCNCA). Among the regional banks, Citi identifies KeyCorp (KEY) as its top pick.
First Citizens Bancshares: Expanding Through Acquisition
First Citizens Bancshares has significantly increased its size through its recent acquisition of Silicon Valley Bank, facilitated by the Federal Deposit Insurance Corp. Over the course of the third quarter, First Citizens’ stock has witnessed a 6.8% rise, showcasing its strong performance.
New York Community Bancorp: Steady Growth
New York Community Bancorp has experienced a 0.4% stock increase over the past three months. In addition, the bank has expanded its operations by acquiring Signature Bank through an FDIC auction.
With these positive ratings and assessments, Citi aims to provide investors with valuable insights into the potential of regional banks as they navigate through changing market dynamics.
Introduction
In the ever-changing world of finance, regional bank stocks have been experiencing mixed results. While Huntington Bancshares has seen a slight decline of 5.3% in the third quarter, Zions has rallied with an impressive 26% increase over the past three months, recovering from earlier losses. On the other hand, KeyCorp has also shown positive growth, rising by 13.8% in the same three-month period.
Contrarian Perspective
Citi analyst Horowitz presents a unique viewpoint that challenges prevailing ratings on Wall Street. Despite acknowledging the promising future of New York Community Bancorp and First Citizens after successful acquisitions, Horowitz favors Huntington Bancshares and Zions. He believes that regional banks present attractive opportunities at present and advises taking an offensive approach rather than a defensive one.
The Appeal of Huntington Bancshares
According to Horowitz, Huntington Bancshares stands out as a “high-quality regional” bank that offers potential upside for its net interest income. What sets it apart is its lack of a premium valuation, making it an appealing choice for investors.
Zions: A Discounted Opportunity
At the same time, Horowitz points out that Zions offers a discounted stock price. Furthermore, he highlights that Zions’ net interest income has already reached its lowest point compared to other banks, suggesting a brighter future ahead.
The Broader Picture
Comparing these findings to the broader market indicators for bank stocks, the KBW Nasdaq Bank Index BKX has experienced a decline of 2.5% in the third quarter. This context emphasizes the significance of Huntington Bancshares’ and Zions’ relative resilience and potential for growth.
Conclusion
As regional bank stocks navigate through fluctuating times, evaluating different perspectives becomes crucial. Analyst Horowitz’s contrarian viewpoint warrants attention, as Huntington Bancshares and Zions offer unique advantages. With their solid performance, both banks demonstrate potential for investors to benefit from their undervalued positions and promising net interest income.
