🍀 3 Banks With More Than Luck on Their Side

Editor’s Note

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Proprietary Data Insights

Financial Pros’ Top Regional Bank Stock Searches Last Month

RankNameSearches
#1First Horizon61
#2Truist Financial53
#3Zions Bancorp48
#4Huntington Bancshares33
#5M&T Bank22
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3 Banks With More Than Luck on Their Side

Banks are all anyone talks about these days.

Rather than fight the trend, we’re giving you a trio of quality regional bank picks.

We used our proprietary Trackstar data to find financial pros’ top regional bank stock searches last month.

From that list, we came up with three with a lot of value that appear much safer than the rest: Truist Financial (TFC), M&T Bank (MTB), and Huntington Bancshares (HBAN).

Why We Chose Them

SVB Financial failed for three main reasons:

  1. A nondiversified depositor base
  2. Heavy exposure to securities that were underwater
  3. Poor interest-rate hedging

To combat the first point, we looked for banks with a larger percentage of deposits below the $250,000 FDIC-insured amount.

SVB had 2.7% because most of its depositors were tech startups.

M&T, Truist, and Huntington all do way better with 46.4%, 42.8%, and 41.1%, respectively.

To address the second problem, we looked at the percentage of assets each bank has in securities.

SVB had 55.4% of its assets in securities.

M&T, Truist, and Huntington again are more conservative, with 12.2%, 23.5%, and 22.2%, respectively.

They put much of their depositors’ money to work through loans.

M&T favors commercial finance and commercial real estate loans, with around $42 billion in each, while it has roughly half the amount in consumer real estate and consumer loans, at $21 billion each.

Truist holds $165 billion in loans for commercial clients, of which only a small portion is tied to real estate. Its consumer loans total $117 billion.

Huntington is evenly split, with $42 billion in commercial loans, only $7 billion of which is tied to real estate, and another $38 billion in consumer loans, of which $12 billion is mortgage-related.

And without getting into the nitty-gritty, all three banks do a fine job hedging to mitigate the effects of price movement.

Truist has a market cap of $43 billion, M&T’s is $21.4 billion, and Huntington’s is $16.1 billion.

Growth

Growth

Source: Seeking Alpha

Huntington and M&T grew year over year. And forecasts say both will do well next year.

Truist didn’t grow YoY. But over the last five years, it had better average growth.

Valuation

Sales

Source: Seeking Alpha

All three banks are cheap on a price-to-earnings basis.

But Truist and M&T trade below book value (a company’s assets minus liabilities), which could be a better deal for investors.

Of the three, Truist has the best price-to-cash-flow ratio.

Profitability

Margins

Source: Seeking Alpha

Huntington had the best net income margin and return on equity. And even though it’s smaller, its cash flows were similar to M&T’s.

Our Opinion 10/10

We expect TFC, HBAN, and MTB to survive and thrive.

Each offers slightly different ways to play the sell-off in banks.

Plus, they all have forward dividend yields over 4%, and in Truist’s case, 6%.

Just let the dust settle for a few weeks before hopping into these names.

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