Pro Picks: 4 Hefty Bank Plays as the Fed Pauses Rate Hikes

The Federal Reserve has finally paused its aggressive campaign to raise interest rates after 10 straight hikes since March of last year. Still, it anticipates two more bumps before the year is out, so we’ll be in a high-interest-rate environment for the foreseeable future. While many sectors are hurt by this kind of backdrop, banks tend to flourish, in large part because it means they earn more from loans than they need to pay out on deposits.

This week’s VIP Pro Picks calls out four bank stocks that also sport exceptional InvestingPro financial health rankings and are trading well under fair value. Among those that rise to the top is regional bank PNC Financial (NYSE:).

Like all Pro Picks, PNC and the rest of this week’s selections have all earned a InvestingPro financial health score of 2.75 or more out of 5, which for the last 7 years has indicated outperformance vs. the . That score indicates firm financials: top-notch earnings, cash flow, and growth vs. peers.

PNC was caught in the larger regional-bank pullback earlier this year, and despite a partial recovery, shares are still off nearly 20% year to date. But Citi analysts upgraded the stock to Buy after that slide and called its management team “one of the best” among large regional banks, citing the bank’s “clean asset quality” and “strong deposit base.”

InvestingPro’s metrics align well with those sentiments: PNC rocks a solid InvestingPro health score of 3.02 thanks in large part to a stalwart bottom line. The bank serves up excellent earnings quality, with free cash flow tending to surpass net income, and it has a strong revenue trend that outranks virtually all its peers. With all that, InvestingPro’s fair value calculations say the stock should rise nearly 30% from current levels.

And you’ll get paid to wait for that upside: PNC’s dividend has been going strong for 52 years, and its current payout is a generous 4.7%.

Want to see the full list of this month’s Pro Picks poised to beat the market? Start a 7-day free trial to unlock must-have insights and data. And while you’re here, dig into InvestingPro’s wealth of tools and screeners to begin building a lucrative portfolio.

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Data as of June 15, 2023.