4 Regional Bank Stocks Rooting for More Rate Hikes

Comerica

• Market value: $12.4 billion
• TipRanks consensus price target: $104.31 (11% upside potential)
• TipRanks consensus rating: Moderate Buy

Comerica (CMA (opens in new tab), $94.32) is a Dallas-based "super-regional" with more than 430 branches, primarily in Texas, Arizona, California, Florida and Michigan. It's among the 50 largest commercial financial holding companies in the U.S., with nearly $95 billion in total assets, $82.3 billion in total deposits and $49.3 billion in total loans.

Earlier in March, ahead of an RBC Capital Markets Conference, Comerica gave a mid-quarter update to analysts. According to this update, the bank's average loans surged by $300 million to $48.1 billion through Feb. 28. That's the first sequential quarter-over-quarter increase since the second quarter of 2020, according to Wedbush analyst Peter Winter, who considers CMA "one of the most levered banks to an economic recovery as it maintains one of the most asset-sensitive balance sheets in our group."

"Core loan growth trends are improving, and [Comerica] has a significantly higher percentage of cash to earning assets vs peers," adds Winter, who rates the stock at Outperform (equivalent of Buy) with a 12-month price target of $103 per share.

Raymond James analyst Michael Rose (Outperform) echoes Winter's sentiment on the regional bank stock: "Looking ahead, all eyes remain on rate expectations, where Comerica reigns as one of the most asset-sensitive names in the industry."

They're two of seven covering analysts that have issued Buy calls on CMA stock over the past three months, representing half the overall number of analysts that have sounded off on Comerica over that time. See which other analysts are in the CMA Buy camp on TipRanks. (opens in new tab)

Synovus Financial

• Market value: $7.2 billion
• TipRanks consensus price target: $61.11 (23% upside potential)
• TipRanks consensus rating: Strong Buy

Synovus Financial (SNV (opens in new tab), $49.73) is a Columbus, Georgia-based regional bank stock with around $57 billion in assets. It provides both commercial and retail banking and a full suite of products and services including treasury management, wealth management, private banking and mortgage services.

Jefferies analyst Casey Haire is upbeat about Synovus's concentrated footprint in the Southeastern U.S., which covers most of the major markets there. And while she's less optimistic about the company's recent performance projections, she thinks SNV shares have plenty of upside even if Synovus comes up short.

"Management delivered an upbeat presentation outlining lofty financial targets. These metrics are achievable but require a hawkish Fed, flawless execution of new initiatives and strong cost discipline, which is a lot to ask for in our view," says Haire, who rates the stock at Buy with a $61 price target. "At [11 times estimated 2023 earnings], the bar is low enough that management doesn't need to fully deliver on these metrics, but just make progress, which is very likely in our view given recent loan growth momentum."

Truist's Jennifer Demba and Brandon King (Buy) weigh in, adding that "SNV has grown up into a more sophisticated regional bank that has & will continue to capitalize on M&A disruption opportunities. We are particularly optimistic about further growth prospects in the wholesale bank and treasury and payment services, augmented by new initiatives in corporate & investment banking."

Nine of nine covering analysts surveyed by TipRanks that have sounded off over the past three months have called SNV stock a Buy. Check out their price targets and analysis at TipRanks (opens in new tab).

East West Bancorp

• Market value: $11.6 billion
• TipRanks consensus price target: $102.80 (26% upside potential)
• TipRanks consensus rating: Strong Buy

East West Bancorp (EWBC (opens in new tab), $81.41), the holding company behind East West Bank, is a Pasadena, California-based regional with more than $60 billion in total assets and more than 120 branches in the U.S. and China. Indeed, EWBC is focused on serving the immigrant Chinese-American community and Chinese immigrants in the United States.

EWBC is "unique" among regional bank stocks, says Jeffereis' Haire (Buy, $107 price target), as it acts as an "economic gateway between the globe's two largest economies." She also believes EWBC can generate above-average returns in the residential mortgage space because of the bank's "unique affinity relationship" with its Chinese-American customer base.

That said, in Q4, the bank's strongest growth in loans (ex-PPP) came from commercial and industrial (C&I) loans, which grew by 16% annualized.

"EWBC tends to be a less discussed stock among many investors," adds UBS analysts Brock Vandervliet and Vilas Abraham (Buy, $120 price target). "That's unfortunate, as we think EWBC is set to outperform this year with higher loan guidance on top of already top tier growth and efficiency."

Four of the five covering analysts surveyed by TipRanks have called EWBC stock a Buy over the past three months. The lone dissenter was a mere Hold call. See EWBC's stock full analyst forecast on TipRanks (opens in new tab).

Signature Bank

• Market value: $19.5 billion
• TipRanks consensus price target: $438.57 (41% upside potential)
• TipRanks consensus rating: Strong Buy

Signature Bank (SBNY (opens in new tab), $311.15) is a full-service commercial bank with 37 private client offices across the metropolitan New York area, and in Connecticut, California and North Carolina. As of the end of 2021, SBNY boasted more than $118 billion in assets and roughly $106 billion in deposits.

Jeffries analyst Ken Usdin says Signature Bank shares remain a Buy following the recent hike in interest rates. The analyst anticipates four rate hikes this year and another rate hike in 2023. Usdin considers that with higher interest rates to rein in inflation, the yield curve is likely to get steeper – that will allow banks to borrow money at lower rates but lend it out at higher rates.

A steeper yield curve benefits banks, as it means they're borrowing money at a much lower interest rate than the rate they're lending it out at.

For SBNY, according to Usdin, this could lead to loan growth in high double digits while the bank's fees would rise by high single digits.

Signature Bank closed out 2021 with outstanding growth. The bank's net interest income jumped 35.7% year-over-year to $535.9 million on the back of growth in average interest-earning assets. Higher fees and service charges also resulted in non-interest income improving by 38.4% year-over-year to $33.5 million.

Other Wall Street analysts echo Usdin's view. SBNY boasts a Strong Buy consensus rating and an average price target of $438.57 – one of the highest implied upsides among regional bank stocks. You can learn more about the analyst community's views on SBNY via TipRanks' stock forecast (opens in new tab).