After a shaky 2022, bank stocks have soared in the first few months of 2023. Investors are becoming more confident that the Federal Reserve can guide the U.S. economy to a “soft landing” as inflation declines.
In general, bank stocks do well during periods of rising interest rates, although this is conditional on the United States avoiding a recession. In general, higher interest rates are good for banks since they enhance their net interest margins (NIM), but a slowing economy may have a negative impact on loan growth.
Wells Fargo & Co (NYSE: WFC)
As one of the major banks in the country, Wells Fargo primarily serves the American market. Similarly, investors seem unconcerned about Wells Fargo’s forecast for NII deterioration in 2023 since the bank is on pace to achieve its long-term target of a sustainable 15% return on tangible common equity (ROTCE).
The company has slashed its gross expenditures by $7.5 billion over the previous two years, and its management plans to save another $3.2 billion in 2023 as part of an ongoing efficiency drive.
In the last month, WFC has been trading in the $40.01 – $48.41 range, which is quite wide. It is currently trading near the high of this range, while resistance is observed at $48.14.
Elsewhere, the sentiment on WFC monthly gauges at finance tracking website TradingView is mainly bullish, with a summary in the ‘strong buy’ zone at 9, the result of oscillators also pointing towards ‘neutral’ at 8, whereas moving averages (MA) are suggesting ‘strong buy’ at 14.
Citigroup (NYSE: C)
Citigroup offers a wide variety of other products and services, such as Citibank, the retail banking subsidiary of the multinational financial services company. Considering that the company is selling for just 9.5 times its profits projection in 2023, it is severely underpriced.
As an additional positive development, the impending sale of Citigroup’s Banamex Mexico subsidiary might serve as a near-term bullish trigger. C stock, which ended trading on February 6 at $50.86, has a “buy” rating from Bank of America with a $60 price target.
The long and short-term trends are both positive. C stock is currently showing a bull flag pattern which occurs when prices pull back slightly after a substantial rise up. This may be a nice opportunity for an entry when considering that prices have been consolidating lately, and the volatility has been reduced as a pullback is taking place. A Pocket Pivot signal is also observed, another positive sign when the price moves up with a volume higher than the maximum down volume registered in the previous ten days.
On Wall Street, 27 analysts gave the stock a ‘buy’ consensus rating. Notably, ten experts advocate a ‘strong buy.’ Elsewhere, 16 recommend ‘hold,’ and one has opted for a ‘strong sell.’
Based on analyst stock evaluations for Citigroup over the last three months, the average price forecast for the next year is $57.72; the target indicates a 12.88% upside from its current price.
JPMorgan Chase & Co (NYSE: JPM)
With approximately $4 trillion in assets, JPMorgan Chase is one of the world’s biggest financial services firms. Chase Bank is a US-based bank licensed to operate under JPMorgan Chase Bank, a subsidiary of JPMorgan Chase & Co.
In the opinion of analyst Ebrahim Poonawala, investors are ignoring JPMorgan’s conservative projections for NII in 2023. A “significant risk” to loan growth, credit quality, and NIM from higher-than-expected interest rates and a delayed Fed pivot to rate decreases is balanced by JPMorgan’s potential for $12 billion in share buybacks in 2023. A “buy” rating and a $153 price target have been assigned to JPM stock by Bank of America.
In the last month, JPM has been trading in the $133.55 – $144.34 range, which is quite wide. It is currently trading near the high of this range. JPMorgan is currently trading in the upper part of its 52-week range. The market is still in the middle of its 52-week range, so JPM slightly outperforms the market at the moment.
Technical analysis on TradingView’s 1-month gauges remain positive, its summary aligning with the ‘buy’ sentiment at 15.
Finally, oscillators point at ‘buy’ at 2, and moving averages indicate a ‘strong buy’ at 13.
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