The year, which remained very turbulent, finally ended with optimism. The launch of the coronavirus vaccine inspired confidence in the resumption of normal activities, thus supporting economic recovery. In addition, it set the stage for bank stocks to witness a strong recovery in 2021.
Robert Redfield, director of the Centers for Disease Control and Prevention, said that more than one million Americans have already received the first dose of the vaccine with the government’s goal of 100 million people to be immunized by the end of the first quarter of 2021, and another 100 million by the second quarter. In this regard, the US government announced yesterday a second agreement with Pfizer PFE and BioNTech BNTX is expected to purchase an additional 100 million shots, with delivery scheduled for July 2021.
Notably, last week, Modern MRNA has received authorization from the US Food and Drug Administration for emergency use against COVID-19 in individuals 18 years of age or older. In addition, according to an article by Livemint, a third vaccine from Johnson & Johnson JNJ can be approved as early as next month.
Since positive vaccine data filled the markets in November, the SPDR S&P Regional Banking ETF and KBW Nasdaq Bank Index have increased by 22.2% and 22.7%, respectively, reflecting investor optimistic sentiments about the growth prospects of banks. In addition, the Zacks Major Regional Banks industry and the Zacks Banks & Thrifts industry gained 25.9% and 21.6%, exceeding the 12% rise for the S&P 500 Index in the same period.
Is the worst over?
Despite the maintenance of norms of social distance, the use of masks and greater awareness of the virus, the cases remain at record levels. According to the Covid Tracking Project, since November, the numbers have witnessed a sharp increase. The seven-day averages of new daily cases peaked at 207,824 with 115,503 hospitalizations and 2,649 deaths on December 23.
Meanwhile, in the midst of the ongoing pandemic, the discovery of a new strain COVID-19 made us suspicious of the vaccines’ effectiveness. This new variant, first discovered in England, has already spread to some other countries and resulted in several nations imposing restrictions on UK travel.
However, a CNN report stated that Pfizer / BioNTech and Moderna are testing their coronavirus vaccines against the new mutated version. In addition, scientists are quite confident that these vaccines will be able to combat the new variant.
How Vaccine News is boosting bank stocks
With more and more vaccines being distributed, the chances of economic recovery increase due to less uncertainty, improving consumer confidence and the restoration of normal activities.
The vaccine-driven economic recovery is expected to increase demand for loans, as people are likely to resume investment in business and other needs. This will increase banks’ net interest income, despite low interest rates, and support profitability to some extent.
In addition, capital market activities are improving, as can be seen in the increase in announced deals and the increase in IPOs. Consulting revenues are likely to be of great help to bank fee revenues in that account.
In addition, Congress recently approved the $ 900 billion COVID-19 stimulus project, which is likely to help banks obtain a respite from the uncertainty of loan loss, which has led them to accumulate billions of dollars in reserves in the first three quarters. 2020.
Notably, major banks in the United States have passed the second round of stress tests, which largely reflect the stability of the banking system. In light of this, banks were allowed to resume share repurchases from next year and maintain dividends at current levels.
Despite positive developments on how to deal with this health crisis, the pandemic will continue for a while. Cases will continue to be reported, as the distribution of the vaccine globally can take time. However, investors looking to invest can always keep an eye on fundamentally strong bank stocks.
5 bank shares likely to recover in 2021
JP Morgan JPM: Based in New York, JPMorgan is one of the largest banks with assets valued at $ 3.25 trillion. Its earnings are projected to grow 17.1% in 2021. In addition, Zacks’ consensus estimate for next year’s earnings has been revised upwards by 2% in the last 60 days.
The lender continues to expand its presence in new regions, opening branches. The bank plans to enter 15-20 new markets by the end of 2022, opening around 400 new branches. The company has moved forward on that front, having added about 120 new branches so far and plans to bring the number to more than 150 by the end of this year.
After the Fed’s second round of stress tests and subsequent approval, the company will resume repurchases in the first quarter of 2021. For 2021, it authorized the repurchase of shares worth up to $ 30 billion.
Since November, the company’s shares have appreciated 24.8%. He currently sports a Zacks Rank # 1 (Strong Buy). You can see the complete list of today’s Zacks # 1 Rank stocks here.
Bank of Hawaii Corporation BOH: Based in Honolulu, HI, the bank offers a wide range of products and services in Hawaii, Guam and other Pacific islands.
Organic growth remains an important strength for Bank of Hawaii, as reflected by its history of revenue growth. In addition, the low cost financing source – unpaid deposits – which represents more than 29% of total deposits is expected to increase net interest income and margin. Therefore, we believe that the company is well positioned to maintain its trend of increasing revenue in the coming days.
Bank of Hawaii’s profits are expected to grow 10.8% in 2021. In addition, analysts appear to be optimistic about the company’s earnings growth prospects. Thus, Zacks’ consensus estimate for its earnings in 2021 has been revised upward by 5.1% in the last 60 days.
The stock currently carries a Zacks Rank # 2 (Buy). Since the development of positive vaccines in November, its shares have gained 26.3%.
OZK Bank OZK: The company currently boasts a Zacks Rank # 1 and its shares have risen 23.5% since the beginning of November. Headquartered in Little Rock, AR, Bank OZK offers a wide range of retail and commercial banking services for businesses, individuals and non-profit and government entities.
Banco OZK grew substantially through a new agency strategy, as well as inorganically. Given a robust liquidity position and decent earnings, the bank is likely to be able to continue to meet debt obligations in the short term.
As the vaccine-driven economy improves, the bank is likely to profit from a better credit scenario and reap the benefits of pent-up consumer demand.
For 2021, the company’s revenue should grow 41.3%. In addition, Zacks’ consensus estimate for its 2021 earnings has been revised upwards by 8.8% in the last 60 days.
UMB Financial Corporation UMBF: Headquartered in Kansas City, MO, UMB Financial Corporation provides banking and asset services in the United States.
The company has focused on diversifying its operations to sources of non-financial income in order to reduce exposure to interest rates to balance unprecedented risks related to the rate environment.
In addition, its capital ratios remain well above the required levels. We believe that a strong capital position will help to undertake opportunistic expansions in the future. In addition, sound capital supports the company’s plan to invest in technology, which can boost operating leverage in the short term.
UMB Financial’s earnings are projected to grow by 2.2% in 2021. In addition, analysts appear to be optimistic about the company’s earnings growth prospects. Thus, Zacks’ consensus estimate for its earnings in 2021 has been revised upward by 18.8% in the last 60 days.
The stock currently carries a Zacks Rank # 2. Since November, its shares have appreciated 12.2%.
Synovus Financial Corp. SNV: Based in Columbus, GA, Synovus Financial Corp. is a diversified financial services company that conducts its banking operations through Synovus Bank. It offers integrated financial services, including commercial and retail banking, financial management, insurance and mortgages to its customers.
His earnings are projected to grow 37.7% in 2021. In addition, Zacks’ consensus estimate for next year’s earnings has been revised upwards by 3.2% in the last 60 days.
Driven by its solid liquidity position, Synovus has been making strategic investments through mergers and acquisitions. In May 2019, she completed the transition from FCB Financial Holdings and about $ 40 million in pre-tax synergies are expected to be fully realized by 2020. In addition, the company hopes to explore similar opportunities in the future as well.
In addition, the company’s loan balance has witnessed a compound annual growth rate of 13.5% over the past five years (2015-2019), which has largely sustained net interest income. With a recovery expected in 2021, the balance of loans to Synovus may continue to increase and help the growth of financial results.
Since November, the company’s shares have appreciated 23.6%. Currently carries a Zacks Rank # 2.
Zacks Top 10 Stocks for 2021
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JPMorgan Chase & Co. (JPM): Free Stock Analysis Report
Johnson & Johnson (JNJ): Free stock analysis report
Pfizer Inc. (PFE): Free stock analysis report
Moderna, Inc. (MRNA): Free Stock Analysis Report
Synovus Financial Corp. (SNV): Free inventory analysis report
UMB Financial Corporation (UMBF): Free Stock Analysis Report
Bank of Hawaii Corporation (BOH): Free Stock Analysis Report
Banco OZK (OZK): Free Stock Analysis Report
Sponsored BioNTech SE ADR (BNTX): Free inventory analysis report
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