When many investors think about banking stocks, the big banks come to mind. These are banks like JPMorgan Chase & Co. (NYSE: JPM), Bank of America (NYSE: BAC), and Citigroup Inc. (NYSE: C). Many of these banks have fortress-like balance sheets because of a solid deposit base and less exposure to risky loans. Simply put, these are the banks into which many high net-worth individuals and businesses want to deposit their cash.
In that regard, it pays to be too big to fail.
But as investments, the big banks may not always be the best option, particularly for growth-oriented investors. For that, you should consider investing in regional banks. These banks have smaller market caps, but depending on the regions that they cover, they could offer investors the opportunity for a higher overall total return. As a bonus, many of these stocks are attractively priced and frequently pay attractive dividends.
As with any investment, however, the quality of the companies you invest in matters. Here are seven regional banks that are safe alternatives for your deposits and your investment capital as well.
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- M&T Bank Corp
- Regions Financial Corp
- Fifth Third Bancorp
- KeyCorp
- Western Alliance Bancorporation
- PNC Financial Services
- Comerica
#1 - M&T Bank Corp (NYSE:MTB)
M&T Bank Corp. (NYSE: MTB) is one of the largest regional banks on this list with a market cap of over $21 billion as of April 2023. The regional bank has a network of over 1,000 branches across 12 states from Maine to Virginia and Washington D.C. The bank provides a diverse combination of retail banking, commercial banking, mortgages, wealth management, and insurance.
Investors will benefit from the company’s fundamentals. It has posted positive earnings in every quarter since 1976. And during the financial crisis of 2008, it was one of only a handful of banks not to lower its dividend. As of its earnings report on April 17, 2023, the bank’s estimated Common Equity Tier 1 ratio was 10.15%. That was down from the 10.44% it reported in December 2022, but it is still above the regulatory requirement of 8%.
About M&T Bank
M&T Bank Corporation operates as a bank holding company for Manufacturers and Traders Trust Company and Wilmington Trust, National Association that engages in the provision of retail and commercial banking products and services in the United States. The company operates through three segments: Commercial Bank, Retail Bank, and Institutional Services and Wealth Management.
Read More - Current Price
- $213.52
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 9 Buy Ratings, 6 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $199.65 (6.5% Downside)
#2 - Regions Financial Corp (NYSE:RF)
Regions Financial Corp. (NYSE: RF) is another regional bank with a diversified menu of services and a wide footprint. In the case of Regions that footprint covers the Midwest, South and Texas. That gives the bank exposure in Florida, Tennessee, and Texas which are three states that benefited the most from population migration during the Covid-19 pandemic.
For the full year 2022, the bank delivered net income of $2.1 billion. This was a 12% increase from 2021 on both a reported and adjusted basis. At that time, the bank had a Common Equity Tier 1 ratio of 9.6% with $9.2 billion of the bank’s cash being held at the Federal Reserve. On the lending side, the bank’s allowance for credit loss ratio was 1.63% of total loans, which is considered to be a strong metric.
As of April 2023, the bank had a dividend yield of 4.22% and had increased its dividend in each of the last two years. It’s market cap is $17.7 billion.
About Regions Financial
Regions Financial Corporation, a financial holding company, provides banking and bank-related services to individual and corporate customers. It operates through three segments: Corporate Bank, Consumer Bank, and Wealth Management. The Corporate Bank segment offers commercial banking services, such as commercial and industrial, commercial real estate, and investor real estate lending; equipment lease financing; deposit products; and securities underwriting and placement, loan syndication and placement, foreign exchange, derivatives, merger and acquisition, and other advisory services.
Read More - Current Price
- $26.26
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 11 Buy Ratings, 5 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $26.18 (0.3% Downside)
#3 - Fifth Third Bancorp (NASDAQ:FITB)
Fifth Third Bancorp (NASDAQ: FITB) is another large-cap regional bank with a market cap of $18.61 billion as of April 2023. The bank’s footprint covers 10 states throughout Ohio and the Southeast United States. As of December 2022, Fifth Third had $207 billion in assets. The bank lists its three core businesses as commercial banking, consumer and small business banking and wealth & asset management.
In the company’s January 2023 earnings report, it stated that it’s Common Equity Tier 1 ratio increased to 9.3% from 9.1%, and management said that it was expected to maintain that ratio at around 9.25% for the remainder of 2023. Additionally, the bank’s loan-to-core deposit ratio (LDR) was 76%, and the bank had over $102 billion in available liquidity sources.
The bank’s dividend yield as of April 2023 is 4.83%, and the bank has increased the dividend for 11 consecutive years, which shows its prudent financial management.
About Fifth Third Bancorp
Fifth Third Bancorp operates as the bank holding company for Fifth Third Bank, National Association that engages in the provision of a range of financial products and services in the United States. It operates through three segments: Commercial Banking, Consumer and Small Business Banking, and Wealth and Asset Management.
Read More - Current Price
- $46.31
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 9 Buy Ratings, 8 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $43.09 (6.9% Downside)
#4 - KeyCorp (NYSE:KEY)
KeyCorp (NYSE: KEY) is one of the smaller large-cap banks on this list. It currently has a market cap of $11.39 billion. The bank is headquartered in Cleveland, Ohio and has a footprint of 1,000 in 15 states. As of April 2023, the bank had assets of approximately $190 billion.
The company divides its business into two divisions: Consumer Bank and Commercial Bank. At the end of 2022, approximately 69% of its loan portfolio was from its commercial customers.
As of 12/31/2022, KeyCorp had a Common Equity Tier 1 ratio of 9.1 that was down slightly from the 9.5% it posted in the prior year, but still comfortably above the regulatory requirement of 8%. It was also within the bank’s forecasted range of between 9.0% and 9.5%.
As of April 2023, the bank had a juicy dividend yield of 6.66% and an impressive streak of 11 consecutive years of dividend increases.
About KeyCorp
KeyCorp operates as the holding company for KeyBank National Association that provides various retail and commercial banking products and services in the United States. It operates in two segments, Consumer Bank and Commercial Bank. The company offers various deposits, investment products and services; commercial leasing, investment management, consumer finance; and personal finance and financial wellness, student loan refinancing, mortgage and home equity, lending, credit card, treasury, business advisory, wealth management, asset management, cash management, portfolio management, and trust and related services to individuals and small and medium-sized businesses.
Read More - Current Price
- $19.02
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 10 Buy Ratings, 9 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $18.03 (5.2% Downside)
#5 - Western Alliance Bancorporation (NYSE:WAL)
Western Alliance Bancorporation (NYSE: WAL) is a small, mid-cap bank with a market cap of just $3.60 billion. The bank operates in the southwestern United States, including Arizona. We’ve pointed out that when it comes to regional banks, location matters. And that’s true in this case as Arizona is seeing growth in its manufacturing sector. Notably, both Intel Corporation (NASDAQ: INTC) and Taiwan Semiconductor Manufacturing (NYSE: TSM) will be building plants in the state.
However, the bank was one of the regional banks that was hardest hit after the collapse of Silicon Valley Bank in March 2023. The bank had $65 billion in assets but did say that deposits had fallen 11% from their December 2022 level.
Nevertheless, as of December 2022, the bank’s Common Equity Tier 1 ratio was 9.32% which was higher than the prior year’s ratio of 9.10%.
About Western Alliance Bancorporation
Western Alliance Bancorporation operates as the bank holding company for Western Alliance Bank that provides various banking products and related services primarily in Arizona, California, and Nevada. It operates through Commercial and Consumer Related segments. The company offers deposit products, including checking, savings, and money market accounts, as well as fixed-rate and fixed maturity certificates of deposit accounts; demand deposits; and treasury management and residential mortgage products and services.
Read More - Current Price
- $89.12
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 14 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $92.73 (4.1% Upside)
#6 - PNC Financial Services (NYSE:PNC)
The PNC Financial Services Group, Inc. (NYSE: PNC) has its headquarters in Pittsburgh, Pennsylvania but has a robust network of 2,300 branches that spans 19 states plus the District of Columbia. The bank has a market cap of $50 billion and although PNC stock took a hit along with many regional banks as a result of the collapse of Silcon Valley Bank, analysts remained favorable on the stock.
As of April 14, 2023, the bank was showing an increase in deposits and at a time when there are concerns of an earnings recession, PNC managed to post earnings of $3.98. This not only beat analysts’ expectations, but also came in ahead of the prior quarter. The bank currently pays a dividend that has a 4.8% yield and has been growing for the last 11 consecutive years.
The bank’s Common Equity Tier 1 ratio of 9.2 which was up slightly from the 9.1% the bank had posted in the prior year.
About The PNC Financial Services Group
The PNC Financial Services Group, Inc operates as a diversified financial services company in the United States. It operates through three segments: Retail Banking, Corporate & Institutional Banking, and Asset Management Group segments. The company's Retail Banking segment offers checking, savings, and money market accounts, as well as time deposit; residential mortgages, home equity loans and lines of credit, auto loans, credit cards, education loans, and personal and small business loans and lines of credit; and brokerage, insurance, and investment and cash management services.
Read More - Current Price
- $203.95
- Consensus Rating
- Hold
- Ratings Breakdown
- 9 Buy Ratings, 6 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $186.96 (8.3% Downside)
#7 - Comerica (NYSE:CMA)
If the adage “everything’s bigger in Texas” is true, then Comerica, Inc. (NYSE: CMA) should be in good shape as the Dallas-based company is positioned in one of the nation’s fastest-growing markets. Notably, Caterpillar Inc. (NYSE: CAT) is moving its headquarters to this area.
And Dallas isn’t the only feather in Comerica’s bank. The bank is located in 14 of the 15 largest metropolitan areas and in nine out of the 10 fastest-growing metropolitan areas.
Comerica is the nation’s 18th largest bank, with $71.4 billion in deposits and approximately $54 billion in loans as of February 2023. It is a mid-cap bank with a market cap of $5.92 billion.
As of December 2022, the bank’s Common Equity Tier 1 ratio was 10.02%. This was up from 9.93% in the prior quarter but slightly down from the 10.13% it recorded in the same quarter the prior year. It is also slightly below the peer average of 10.17.
About Comerica
Comerica Incorporated, through its subsidiaries, provides various financial products and services. The company operates through Commercial Bank, Retail Bank, Wealth Management, and Finance segments. The Commercial Bank segment offers various products and services, including commercial loans and lines of credit, deposits, cash management, payment solutions, card services, capital market products, international trade finance, letters of credit, foreign exchange management services, and loan syndication services for small and middle market businesses, multinational corporations, and governmental entities.
Read More - Current Price
- $67.88
- Consensus Rating
- Hold
- Ratings Breakdown
- 8 Buy Ratings, 12 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $64.43 (5.1% Downside)
Bank stocks are generally among the safest stocks you can own. However, in 2007 and again in 2023, investors were reminded that they still present risk. In a low-interest rate environment, that may not be a risk worth taking. In a “higher for longer" rate environment, bank stocks generally perform well, and the risk calculation changes in favor of opportunistic investors.
If picking individual stocks is not your style, you can get exposure to regional banks in a variety of exchange-traded funds (ETFs) that specialize in regional banks. One option is the SPDR S&P Regional Banking ETF (NYSEARCA: KRE). ETFs allow you to get exposure to an entire sector, and the fund managers go to great lengths to ensure their returns keep pace with the market index they are tracking.
Another advantage of investing in regional ETFs is that you can count on the fund managers to have performed their due diligence. Most banks have a predictable and regulated business model. But there still could be nuances that conceal risks that retail investors may not pick up on. Investing in an ETF can smooth out that risk.
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