3 Bank Stocks Leading the Way This Earnings Season

Things are getting a little spooky on Wall Street as third-quarter earnings season kicks off this week. And as per usual, bank stocks will lead the way. In 2021, bank stocks have been solid performers. For one thing, financial stocks are one of the only sectors that benefit from rising interest rates.  

Although the Federal Reserve is unlikely to increase the federal funds rate until next year, bank stocks will be reporting in the current environment of persistent inflation and rising interest rates for borrowers. This means that bank stocks are likely to deliver solid results.  

However, analysts are always forward-thinking. So investors still need to be selective about the equities they choose. Here are three bank stocks that continue to get a Buy rating from analysts.  

JPMorgan Chase (NYSE:JPM) - Topping my list of bank stocks to buy is JPMorgan Chase. The bank has been seeing significant growth in its deposit accounts. However, analysts will be paying close attention to hear what the bank has to say about the outlook for the U.S. economy. If you adhere to the idea that a growing economy is a key to the fortunes of bank stocks, then it’s easy to believe in the bank that has one of the strongest balance sheets. This puts it in a position to take advantage of stronger consumer and commercial loan demand.  

JPM stock is up 35% in 2021. Plus, JPMorgan is a great dividend stock that currently offers a 2.35% yield which currently translates to a $4 per share annual dividend.  

The bank has an attractive P/E ratio of 11.43 and right now the stock is trading near its 52-week high and slightly above the consensus pick of analysts.  

Citigroup (NYSE:C) - Citigroup stock is “only” up 20% in 2021 making it a laggard among bank stocks but analysts have a bullish outlook on the stock. Analysts are expecting to hear more information from new CEO Jane Fraser about the company’s strategic positioning that should include plans for the company to increase its return on tangible equity (ROTE) that currently is also lagging behind other bank stocks.  

Plus, some analysts note that Citigroup is trading significantly below its tangible book value (TBV). In the first half of 2021, Citigroup paid out approximately $7 billion to shareholders by way of dividends and stock repurchases. However, the bank admitted that it would have likely done more but was limited by the Federal Reserve’s regulations. With those regulations lifted, analysts will be paying close attention to the number of shares the company repurchased in the third quarter.  

Right now, Citigroup has a nearly 10% upside compared to the consensus analyst projection of $79.50. The bank has one of the lowest P/E ratios in the sector at 7.32. 

Morgan Stanley (NYSE:MS) - Morgan Stanley has been one of the fastest-growing stocks in 2021.  Morgan Stanley has a P/E ratio of 13.39 and is up 46% for the year. That means it’s currently trading slightly above the consensus rating of analysts. However, analysts hint that the bank may still have more growth to come. Just a week before earnings, the bank received two upgrades from analysts that suggest continued price growth.  

Investors love the company’s investment banking and wealth management businesses which deliver dependable fee-based revenue quarter after quarter. To that end, the bank delivered more than 8% year-over-year revenue growth in Q2. And the company also rewarded shareholders by doubling its dividend and announced it would be repurchasing up to $12 billion shares in the next 12 months. The dividend is now yielding 2.80% which calculates to a $2.80 per share annual payout.