Opportunity: 3 Stocks to Snap Up After the Banking Fallout

Value investors have three bargain bank stocks to consider.

After Silicon Valley Bank failed to manage customer withdrawal requirements, the Federal Deposit Insurance Corporation stepped in to shut it down.

The FDIC also shut down Signature Bank. The equal wipeout of debt holders and preferred shareholders ignited a panic. Stock markets are dumping regional banks. Related financial institutions are also selling off.

Investors may snap up stocks that are trading at a steep discount. Once the negative sentiment reverses, the value of those companies should rise.

KeyCorp (KEY)
KeyCorp (NYSE:KEY) traded in the high teens before the banking fallout and closed at $11.86 at the time of writing. Before all that, it posted several weak fourth-quarter 2022 metrics.

KeyCorp reported a higher cost of deposit, rising to 0.51% compared to 0.04% in the year-ago period. Its allowance for credit losses increased to $1.562 billion, up from $1.221 billion. On the bright side, the company posted average loans increased by 2.9% to $117.7 billion.

KeyCorp is deepening its customer relationships, which resulted in a growth in consumer mortgages. It will deepen its investments while taking out costs. Chief Executive Officer Chris Gorman said that KeyCorp wants to grow its customer base by 20% by 2025. It will achieve this by focusing on its growth markets. This includes building on its momentum in winning younger customers.

KeyCorp will hire more bankers to grow its market share. While a downturn ahead will slow the sector, the company will invest in its staff.

Truist Financial (TFC)
Truist Financial (NYSE:TFC) is a bank holding company, formed in 2019 after the merger of BB&T and SunTrust Banks.

Chief Executive Officer Bill Rogers is confident that the company will outperform in the asset and liability segment, expanding its fee collections.

Truist may grow its insurance and investment banking businesses. It will leverage its relationships to build its commercial core businesses. By increasing its staff count, it will benefit from tailwinds once they appear.

The interest rate hikes are currently headwinds for the economy. However, Truist benefits from collecting higher net interest income. NII is expanding margins. The modest loan growth may offset some of its net interest margins. However, TFC stock has a potential upside when average loan volumes increase. This grew last quarter and will likely increase again this year.

Economic market conditions are uncertain. However, in the second half of the year, the investment banking business might recover. This will offset some of the pressure on the residential mortgage business.

Charles Schwab (SCHW)
Charles Schwab (NYSE:SCHW) added around $16.5 million in core assets for the week ending March 16, 2023. This shows that its 34 million account holders are confident in the company’s liquidity and safety.

In an interview with The Wall Street Journal, CEO Walt Bettinger said that even if it lost most of its deposits over the next year, it could continue operations. This worst-case scenario is highly unlikely. It reasserts the CEO’s assessment of strong coverage for customer deposits.

SCHW stock has two positive catalysts ahead. When market fears about bank runs ease, the stock should recover. Second, calmer markets will attract investors to increase their transactions. The higher trading volume will increase Schwab’s revenue.

On March 14, 2023, CNBC reported that billionaire investor Ron Baron bought more SCHW stock. CEO Bettinger bought 50,000 shares for his personal account. The strong insider buying will strengthen Schwab’s reputation. It increases customer confidence in the company.

— Chris Lau

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Source: Investor Place