Bank Stocks Hit Inflection Point After Fed's 50 Basis Point Cut, Analyst Reveals Top Picks
Portfolio Pulse from Surbhi Jain
The Federal Reserve's 50 basis point rate cut is expected to benefit mid- and small-cap banks by improving net interest margins and loan demand. JPMorgan analyst Steven Alexopoulos highlights several banks poised for growth, including First Citizens BancShares, Huntington Bancshares, M&T Bank, Western Alliance, Pinnacle Financial Partners, Cullen/Frost Bankers, Live Oak Bank, Metropolitan Bank, and Amalgamated Bank.
September 19, 2024 | 12:24 pm
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POSITIVE IMPACT
Amalgamated Bank will improve as rates decline, with its focus on social impact banking alleviating credit stress concerns.
Amalgamated's focus on social impact banking and the favorable rate environment should alleviate credit stress concerns.
CONFIDENCE 60
IMPORTANCE 30
RELEVANCE 40
POSITIVE IMPACT
Cullen/Frost Bankers will benefit from the Fed's cuts by focusing on organic expansion in Texas, driving loan demand and growth.
Cullen/Frost's focus on Texas's growth cities positions it to benefit from improved loan demand due to the Fed's rate cuts.
CONFIDENCE 75
IMPORTANCE 45
RELEVANCE 55
POSITIVE IMPACT
First Citizens BancShares is expected to benefit from the Fed's rate cuts, with a resurgence in VC investment and IPO activity boosting its SVB segment.
The Fed's rate cuts are likely to increase venture capital investment and IPO activity, benefiting First Citizens' SVB segment and potentially leading to a re-rating of the stock.
CONFIDENCE 90
IMPORTANCE 70
RELEVANCE 80
POSITIVE IMPACT
Huntington Bancshares is positioned to benefit from increased C&I loan demand and accelerated earnings due to the Fed's easing.
Huntington's strategy to hire bankers in growth markets aligns with the expected increase in C&I loan demand, enhancing its earnings potential.
CONFIDENCE 85
IMPORTANCE 65
RELEVANCE 75
POSITIVE IMPACT
Live Oak Bank expects a reset in funding costs and plans to lead loan growth as borrowing cost uncertainty diminishes.
Live Oak's strategy to capitalize on improved borrower demand aligns with the benefits of the Fed's rate cuts.
CONFIDENCE 70
IMPORTANCE 40
RELEVANCE 50
POSITIVE IMPACT
Metropolitan Bank will benefit from reduced credit quality concerns in its CRE loans due to the Fed's rate cuts.
Metropolitan's focus on niche sectors and proactive credit management positions it to benefit from the Fed's rate cuts.
CONFIDENCE 65
IMPORTANCE 35
RELEVANCE 45
POSITIVE IMPACT
M&T Bank is expected to see improved credit quality in its CRE sector, reducing reserve needs and allowing for increased buybacks.
The Fed's rate cuts should improve M&T's criticized loans, particularly in CRE, reducing reserve requirements and enabling buybacks.
CONFIDENCE 80
IMPORTANCE 60
RELEVANCE 70
POSITIVE IMPACT
Pinnacle Financial Partners plans to lower deposit rates, boosting NII and benefiting from high-growth markets in the Southeast.
Pinnacle's strategy to lower deposit rates and focus on high-growth markets aligns with the benefits of the Fed's rate cuts.
CONFIDENCE 80
IMPORTANCE 50
RELEVANCE 60
POSITIVE IMPACT
Western Alliance is well-positioned to benefit from lower rates, reducing deposit costs and capitalizing on a potential resurgence in VC and IPO markets.
Western Alliance's exposure to the startup economy and capital call lending positions it to benefit from the Fed's rate cuts.
CONFIDENCE 85
IMPORTANCE 55
RELEVANCE 65