The banking sector is a cornerstone of a healthy economy, and cheap bank stocks present an enticing opportunity for discerning investors. However, with numerous players in the field, choosing the right ones for your portfolio requires careful consideration.
While the failure of some regional banks has cast a shadow over the industry, several key players are trading at attractive valuations. These cheap bank stocks offer the potential for significant growth with strong balance sheets and improving fundamentals. With improving macroeconomic factors in the economy, these three bank titans are set to outperform over the next decade.
Now, let’s discover the top three cheap bank stocks to buy now!
JPMorgan Chase (JPM)
JPMorgan Chase (NYSE:JPM) stands tall as the largest bank in the U.S. by assets. The company boasts a diversified stream of revenues encompassing commercial banking, consumer banking, investment banking, and asset management.
JPMorgan Chase benefits from a global presence, strong brand recognition, and a history of consistent profitability. In the last two years, the company benefited from higher interest rates, translating into significant net interest income expansion. Additionally, they capitalized on the regional banking crisis after acquiring First Republic’s consumer loan assets at a steep discount.
Looking out to the end of 2024, the company is not expected to see significant growth as interest rates come down. But they are in a great position financially and will continue growing as the banking industry and economy recovers. Strong consumer spending is a healthy sign that JPM will be able to manage capital efficiently and grow its net interest income and EPS. With a price-to-earnings (P/E) of 12, JPM is one of the best cheap bank stocks to snap up in March.
Bank of America (BAC)
Bank of America (NYSE:BAC) is the second largest bank in the United States, with total assets of approximately $3.18 trillion. While the macroeconomic backdrop did not favor BAC nearly as much as its opposition, they’re set to benefit from an improving economy.
Bank of America is up nearly 10% year-to-date as Wall Street digests the possibility of rate cuts in the back half of this year. Federal Reserve Chairman Jay Powell reiterated at the latest FOMC meeting that three rate cuts are on the horizon. Ultimately, this is bullish for large banks where risk appetite will likely increase over the coming years. But this is not the only reason to take a closer look at the stock.
In fourth quarter, average loans and leases increased 4% YOY to $313 billion. Furthermore, they’re beginning to see an uptick in client activity through their consumer banking and global wealth management divisions. Presently, BAC boasts a trailing P/E of 12 with a price-to-sales (P/S) ratio of 3. Although the banking sector has largely been avoided over the past couple of years, their valuation is certainly compelling for long-term investors.
Goldman Sachs (GS)
Goldman Sachs (NYSE:GS) is a titan in the world of investment banking, with a long history of advising corporations and governments on mergers, acquisitions and capital market transactions. The past two years have been slow but investors are looking past it with strengthening macroeconomic tailwinds.
Goldman Sachs revenue was down 2% in fiscal 2023, largely driven by weaker growth in their global banking and markets division. Industry-wide completed mergers and acquisitions were down substantially, as higher interest rates severed business confidence and deal flow. Furthermore, revenue from advisory fees fell significantly and it didn’t help that operating expenses rose 11% YOY.
However, Goldman’s asset and wealth management division saw continued strength, which is likely to continue in 2024. Net revenues were up 4% from 2022, partially led by higher net deposit spreads and balances. Goldman Sachs also has a healthy dividend yield of 2.70%, and they have grown their dividend at a 20% compounded annual growth rate over the last decade. As investors look forward to the prospect of lower interest rates in 2024, GS is among the top cheap bank stocks to keep on your radar.
On the date of publication, Terel Miles did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
