4 Regional Banks to Buy as Rates Continue to Rise Rising U.S. Treasury yields and expected interest rate hikes this year bode well for the banking sector. So, we think it could be wise to add quality bank stocks Hancock...
By Dipanjan Banchur •
This story originally appeared on StockNews
Rising U.S. Treasury yields and expected interest rate hikes this year bode well for the banking sector. So, we think it could be wise to add quality bank stocks Hancock Whitney (HWC), TowneBank (TOWN), 1st Source (SRCE), and Origin Bancorp (OBNK) to one's portfolio. Read on.
U.S. Treasury yields have been rising lately, crossing 2% for the first time since mid-2019 after the consumer price index increased 7.5% year-over-year in January, beating the Dow Jones estimate of 7.2% and marking the highest increase since February 1982. The rise in Treasury yields should help banks earn more interest income. Investors' growing interest in regional bank stocks is evident in the SPDR S&P Regional Banking ETF's (KRE) 15.3% gains over the past six months.
The hotter-than-expected inflation data may compel the Fed to raise interest rates aggressively in March. Higher interest rates help banks increase their profits. Lawrence Gillum, the fixed-income strategist for LPL Financial, said, "Our year-end 2022 forecast for the 10-year Treasury yield is 1.75 - 2.00%."
Given this backdrop, we think it could be wise to add quality regional bank stocks Hancock Whitney Corporation (HWC), TowneBank (TOWN), 1st Source Corporation (SRCE), and Origin Bancorp Inc. (OBNK) to one's portfolio.
Hancock Whitney Corporation (HWC)
Headquartered in Gulfport, Miss., HWC is a bank holding company for Hancock Whitney Bank, which provides a range of traditional and online banking products and services to commercial, small business, and retail customers. The company offers treasury management services, transaction and savings deposit products, unsecured loan products, and letters of credit. It also provides trust and investment management services to retirement plans, corporations, and individuals.
HWC's net income for its fiscal fourth quarter, ended Dec. 31, 2021, came in at $137.70 million, up 6.2% sequentially. Its EPS has increased 6.1% sequentially to $1.55. Also, its noninterest income increased 8.8% year-over-year to $89.61 million.
Analysts expect HWC's EPS for the quarter ending June 30, 2022, to increase 33% year-over-year to $1.33. For its fiscal 2023, HWC's revenue is expected to increase 8.4% year-over-year to $1.41 billion. It surpassed consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 47.6% in price to close the last trading session at $56.09.
HWC's POWR Ratings reflect solid prospects. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
The stock has a B grade for Momentum, Stability, and Sentiment. Within the Southeast Regional Banks industry, it is ranked #5 of 25 stocks. To see the other ratings of HWC for Growth, Value, and Quality, click here.
TowneBank (TOWN)
TOWN provides retail and commercial banking services for individuals, professionals, and commercial enterprises. The Portsmouth, Va., company operates in the banking, realty, and insurance segments. It accepts various deposit products and offers secured and unsecured personal loans. In addition, it provides commercial lending and mortgage loans.
For its fiscal year ended Dec. 31, 2021, TOWN's total deposits were $13.57 billion, representing a 17.2% increase year-over-year. The company's total revenues increased 2.4% year-over-year to $680.33 million. Also, its total deposits for the fourth quarter ended Dec. 31, 2021, increased 17% year-over-year to $13.57 billion.
For its fiscal year 2023, TOWN's EPS and revenues are expected to increase 8.3% and 6.7%, respectively, year-over-year to $2.61 and $708.70 million. It surpassed the Street's EPS estimates in three of the trailing four quarters. And over the past year, the stock has gained 15.8% in price to close the last trading session at $31.78.
TOWN's POWR Ratings reflect strong prospects. The company has an overall B rating, which translates to a Buy in our proprietary rating system.
It has a B grade for Momentum, Stability, and Sentiment. It is ranked #6 of 32 stocks in the Mid-Atlantic Regional Banks industry. Click here to see the additional ratings of TOWN for Growth, Value, and Quality.
1st Source Corporation (SRCE)
SRCE operates as the holding company for SRCE, which provides commercial and consumer banking services, trust and wealth advisory services, and insurance to individual and business clients. The South Bend, Ind.-based company also offers commercial, small business, agricultural, and real estate loans for general corporate purposes.
SRCE's net income for its fiscal year ended Dec. 31, 2021, increased 45.5% year-over-year to $118.53 million. The company's EPS came in at $4.70, representing a 48.2% increase year-over-year. Also, its EPS for the fourth quarter ended Dec. 31, 2021, increased 7.7% year-over-year to $1.11.
Analysts expect SRCE's EPS and revenue for fiscal 2023 to increase 4.1% and 3.6%, respectively, year-over-year to $4.03 and $341.59 million. It surpassed consensus EPS estimates in three of the trailing four quarters. And over the past year, the stock has gained 15% in price to close the last trading session at $49.83.
SRCE's POWR Ratings reflect solid prospects. The company has an overall B rating, which translates to a Buy in our proprietary rating system.
It has a B grade for Momentum, Stability, and Sentiment. It is ranked #5 of 42 stocks in the Midwest Regional Banks industry. To see the other ratings of SRCE for Growth, Value, and Quality, click here.
Origin Bancorp, Inc. (OBNK)
OBNK in Ruston, La., provides banking and financial services to small- and medium-sized businesses, municipalities, high net worth individuals, and retail clients. It offers noninterest and interest-bearing checking accounts, savings deposits, money market accounts, and time deposits. It also provides mortgage warehouses, residential mortgages, and paycheck protection program loans.
For its fiscal fourth quarter, ended Dec. 31, 2021, OBNK's net income increased 60.7% year-over-year to $28.32 million. The company's total deposits increased 6.6% sequentially to $6.57 billion. Also, its net interest income increased 3.1% sequentially to $54.18 million.
For its fiscal year 2023, OBNK's EPS and revenues are expected to increase 8.4% and 9.7%, respectively, year-over-year to $3.76 and $309.52 million. It surpassed the Street's EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 32.4% in price to close the last trading session at $44.41.
OBNK's strong fundamentals are reflected in its POWR ratings. The company has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A grade for Sentiment and a B grade for Momentum and Stability. Within the Southwest Regional Banks industry, it is ranked #4 of 27 stocks. Click here to see the other ratings of OBNK for Growth, Value, and Quality.
HWC shares were unchanged in premarket trading Thursday. Year-to-date, HWC has gained 12.14%, versus a -5.97% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master's degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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