Wall Street analysts think 5 bank stocks will gain in the second half
The world’s most important central bank said the largest U.S. lender is strong enough to withstand a potential economic slowdown. All 23 banks in the Fed’s annual stress test passed the key assessment after markets closed on Wednesday. The Fed’s stress tests, stemming from the 2008 global financial crisis, put banks through severe recessionary scenarios to ensure each bank could continue to operate and lend normally, even under unusual economic conditions. Still, most banks’ earnings and stock prices have a long way to go to recover from the brief liquidity scares sparked by the collapses of Silicon Valley Bank, Signature Bank and First Republic earlier this year. For example, the Invesco KBW Bank ETF is down more than 30% since the new year, while PacWest Bancorp is down nearly 65% year-to-date and Western Alliance Bancorp is down 39%. Still, Thursday’s stress test helped lift major bank stocks including Wells Fargo and JPMorgan. Then, on Friday, JPMorgan shares hit their highest level in more than a year. Against this backdrop, CNBC Pro screened the banks in the Invesco KBW Bank ETF for those likely to perform well in the second half of the year, using the following criteria: Each stock is in the KBW ETF. At least 55% of analysts rate the stock a buy. Analysts’ average target price implies at least a 10% upside potential for each stock. Goldman shares have fallen more than 6 percent since the start of the year. The firm is dealing with headwinds from disagreements between Goldman Sachs partners and current CEO David Solomon, as well as a hefty loss from its 2021 acquisition of GreenSky. Still, 56% of Goldman analysts polled by FactSet rate it a buy, and its average price target implies roughly 19% upside from current trading levels. GS Shares of Goldman Sachs are down more than 5% so far this year from January. Meanwhile, Phoenix-based Western Alliance shares are down 58% from their 52-week highs. Despite the impact of regional banking turmoil that began in February, analysts expressed optimism that Western Union will begin to reverse its bearish trend in May after a company update showed deposits were expected to rise. Nearly 88% of analysts polled by FactSet view it as a buy, and its average price target implies more than 49% upside. WAL Mountain West Union stock has fallen more than 38% year-to-date. Wells Fargo shares are up nearly 3.5% in 2023, following Thursday’s 3.4% gain following the Fed’s stress tests. Analysts are bullish on the San Francisco-based bank, with 60% of analysts polled by FactSet giving Wells Fargo a buy rating. Meanwhile, their price targets, on average, imply an upside of about 14% from where the stock is currently trading. So far in 2023, WFC Mountain Wells Fargo shares have risen more than 3%.
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