Analysts still like a lot of bank stocks that are selling low to book value because funding costs are going down. This is even though bank stocks have been going up.
In the past few years, investors have lost faith in bank stocks because of a number of events, such as the failure of three large regional banks in the first half of 2023, falling prices for commercial real estate, and high short-term interest rates that cut many lenders’ net interest margins.
But look at how bank stock markets have gone up in value over the last three months, up to Wednesday:
Twenty-four of the biggest banks in the United States make up the KBW Nasdaq Bank Index BKX 0.12%. The Invesco KBW Bank ETF KBWB 0.12% keeps an eye on it and owns all the stocks in the index. The exchange-traded fund and the index are both weighted by market value, with a cap of 8% when the index is rebalanced every three months.
In general, P/TBV values have been going up a lot over the past year. Only Bank of America BAC -0.30% trades at a P/TBV ratio that is lower than its average over the last five years. FactSet polled experts and found that most of them think the stock is a buy.
A bigger list of grades and prices for bank stocks
We looked at more U.S. bank stocks than just the 24 companies in the KBW Nasdaq Bank Index. We then added the 50 companies in the KBW Nasdaq Regional Banking Index KRX -0.15%, which is followed by the Invesco KBW Regional Banking ETF KBWR 0.47%. The KBW Nasdaq Bank Index has given back 17% so far this year, after profits were reinvested. The KBW Nasdaq Regional Banking Index, on the other hand, has only given back 1.2%. The chart above shows that the regional banking group has been on a roll for the past three months. And over the last three months, both groups of banks have done much better than the S&P 500 SPX -0.13%.
Investors may be excited about banks right now because they think interest rates on saving accounts will go down. On September 18, the Federal Open Market Committee lowered its goal range for the federal funds rate by 0.5 point. The next event for the Fed is on November 6-7.
Out of the 74 banks that were shown, 39 of their stocks were selling at P/TBV prices that were lower than their five-year averages as of Wednesday night.
FactSet polled analysts and found that 11 of the 39 selling at discounted prices had majority buy or similar ratings.
