Bank stocks are cheap these days thanks to investors' concerns about lowered interest rates, trade wars, and the possibility of a recession. However, while bank stocks are more obviously susceptible to forces outside of their control, they're usually stable, long-term keepers for serious investors. And if these banks can hold their own when interest rates dip, we're sure to see them surge if and when rates do increase.
Bank stocks dipped lower over the summer, but as the economy stays strong, they're already rebounding. Here are three top picks for bank stocks to buy right now.
1. Bank of America
Bank of America (BAC 0.51%) is a star in the banking scene, with a strong customer focus, tightened expenses, and growth in all of its products. No wonder Warren Buffett has increased his stake in the company to 10%, making it the second-largest Berkshire Hathaway holding.
These were some of the company's highlights in the third quarter:
- Net income increased despite flat revenue thanks to cost-savings operations.
- There was a 6% increase in commercial loans and a 4.5% increase in average deposits.
- BAC returned $9.3 billion to investors through dividends and share buybacks.
The company also consistently invests in itself and its workplace, adding digital power to its online presence and adding value for its customers. It also recently raised its minimum wage for employees to $20 an hour, 30% above the industry standard of $15 an hour.
Add all of this to a healthy dividend and, at around a $33 share price, it's a great buy.
2. Capital One
Capital One (COF 1.41%) was hit with a massive cybersecurity breach in the summer that it's expecting will cost it over $100 million in 2019 and will continue to add to its expenses in the coming quarters. The company has managed to pick up and move on from there, trying to expand its reach through various partner relationships, such as a credit card with Walmart and an app with OpenTable. It's also offering better account options for customers, including additional credit cards with no fees and service-packed apps.
Capital One had a lukewarm third quarter with decreased revenue and net income year over year, partially due to the security breach. However, it beat expectations on Wall Street, and its share price has been rising. The company was voted best for small business banking by J.D. Power and Associates.
This bank stock is trading higher than some of its peers, at around $100 a share, but with a price-to-earnings ratio of 9, the stock is still a great buy.
3. JPMorgan Chase
There's a lot of talk about JPMorgan Chase (JPM 0.70%) already selling at a high, but that shouldn't stop investors from believing that the bank stock will continue to rise if it maintains excellence in its operations and numbers. The price may be high, but it's not overvalued. The bank's price-to-earnings ratio of 13, while above the average bank P/E ratio of 10, is still relatively low when compared to stocks in other industries (Amazon's is 76) and to the S&P 500 overall (currently around 24).
The largest American bank continues to deliver stellar results, with a record $30 billion in revenue for the third quarter of 2019, beating analysts' expectations for an 8% increase year over year. Consumer banking saw a 10% increase in both credit card sales and investment assets, and deposits were up 5% year over year.
As CEO Jamie Dimon noted, JPMorgan is "demonstrating broad-based strength and the resilience of our business model despite a more challenging interest rate backdrop."
The company also pays a generous quarterly dividend, recently raising it to $0.90. The dividend annually now totals $3.30 per share, a 33% increase from 2018.
As we continue to see a robust economy, we will also see JPMorgan Chase do more of what it does so well -- and for the share price will reflect that.