5 Most Undervalued Bank Stocks To Buy According To Analysts

In this article, we discuss 5 most undervalued bank stocks to buy. If you want to read our discussion on the banking industry, head directly to 12 Most Undervalued Bank Stocks To Buy According To Analysts. 

5. UBS Group AG (NYSE:UBS)

Number of Hedge Fund Holders: 35

PE Ratio as of March 4: 3.27

Average Upside Potential: 16.73%

Average Analyst Price Target: $33.62

UBS Group AG (NYSE:UBS) is a global financial institution that offers financial advice and solutions to private, institutional, and corporate clients. It operates through four divisions – Global Wealth Management, Personal & Corporate Banking, Asset Management, and Investment Bank. On February 6, UBS Group AG (NYSE:UBS)’s board of directors proposed a $0.70 per share dividend, marking a 27% year-over-year increase in the ordinary dividend from 2023. The dividend will be paid on May 3, to shareholders on record as of May 2.
According to Insider Monkey’s fourth quarter database, 35 hedge funds were bullish on UBS Group AG (NYSE:UBS), compared to 33 funds in the last quarter. Cevian Capital is the biggest stakeholder of the company, with 43.7 million shares worth $1.35 billion. 

Patient Capital Management stated the following regarding UBS Group AG (NYSE:UBS) in its fourth quarter 2023 investor letter:

“UBS Group AG (NYSE:UBS) is a name we opportunistically purchased following the banking crisis earlier in the year. UBS benefited from buying its largest local competitor, Credit Suisse, for an 80% discount from where it was trading before the crisis. We bought after the deal, believing the market’s myopic focus on short-term integration risks failed to properly value the attractive set of assets. While the stock has done well since then, we still believe it is underappreciating the long-term return potential of the business.”

4. Citizens Financial Group, Inc. (NYSE:CFG)

Number of Hedge Fund Holders: 35

PE Ratio as of March 4: 10.29

Average Upside Potential: 16%

Average Analyst Price Target: $37.44

Citizens Financial Group, Inc. (NYSE:CFG) is a bank holding company that offers retail and commercial banking products and services in the United States. Citizens Financial Group, Inc. (NYSE:CFG) provides deposit products, lending services, credit cards, wealth management, and investment services to individuals, small businesses, and corporations. It is one of the most undervalued stocks to invest in. 

On February 5, Citi upgraded Citizens Financial Group, Inc. (NYSE:CFG) stock to a Buy rating, advocating an offensive stance in the banking sector. The upgrade is based on the belief that owning bank stocks is most favorable when valuations shift from late-cycle to early-cycle multiples. Analyst Keith Horowitz anticipates banks to outperform in the current credit cycle due to limited excess credit creation, noting a loss of market share by banks since the 2008 financial crisis.

According to Insider Monkey’s fourth quarter database, 35 hedge funds were bullish on Citizens Financial Group, Inc. (NYSE:CFG), compared to 36 funds in the prior quarter. Cliff Asness’ AQR Capital Management is the largest stakeholder of the company, with 3.74 million shares worth $124 million. 

3. East West Bancorp, Inc. (NASDAQ:EWBC)

Number of Hedge Fund Holders: 38

PE Ratio as of March 4: 

Average Upside Potential: 12.24%

Average Analyst Price Target: $83.79

East West Bancorp, Inc. (NASDAQ:EWBC) is one of the most undervalued stocks to buy. It is a bank holding company for East West Bank, offering a variety of personal and commercial banking services in the United States. The company operates through three segments – Consumer and Business Banking, Commercial Banking, and Other. On January 24, East West Bancorp, Inc. (NASDAQ:EWBC) declared a $0.55 per share quarterly dividend, a 14.6% increase from its prior dividend of $0.48. The dividend was distributed to shareholders on February 15. 

According to Insider Monkey’s fourth quarter database, 38 hedge funds were long East West Bancorp, Inc. (NASDAQ:EWBC), compared to 32 funds in the last quarter. Ken Griffin’s Citadel Investment Group is the leading stakeholder of the company, with 2.28 million shares worth $164.6 million. 

2. Comerica Incorporated (NYSE:CMA)

Number of Hedge Fund Holders: 39

PE Ratio as of March 4: 7.88

Average Upside Potential: 17.70%

Average Analyst Price Target: $59.72

Comerica Incorporated (NYSE:CMA) provides diverse financial products and services. The company operates through Commercial Bank, Retail Bank, Wealth Management, and Finance segments. On February 27, Comerica Incorporated (NYSE:CMA) declared a quarterly dividend of $0.71 per share, in line with previous. The dividend is payable on April 1, to shareholders on record as of March 15. 

According to Insider Monkey’s fourth quarter database, 39 hedge funds were long Comerica Incorporated (NYSE:CMA), compared to 42 funds in the prior quarter. Ken Griffin’s Citadel Investment Group is the largest stakeholder of the company, with 1.70 million shares worth $95 million. 

Third Avenue Value Fund made the following comment about Comerica Incorporated (NYSE:CMA) in its first quarter 2023 investor letter:

“The largest detractors from Fund performance during the quarter included two banks, Comerica Incorporated (NYSE:CMA) and Deutsche Bank. As it relates to the Fund specifically, events within U.S. banking applied most directly to our investment in Comerica, a U.S. super-regional that does have a large portion of corporate deposits and is not classified as a globally systemically important bank (“G-SIB”), which means it has not recognized certain mark-to-market securities losses in its regulatory capital. Comerica was a 2.6% position at the beginning of the quarter, prior to a roughly 34% stock price decline during the quarter. After purchasing more shares following the stock price decline, the Fund’s position in Comerica was approximately 2.3% at quarter end. While the general contagion fears and bank depositor behavior remain a fluid situation today, we took some confidence from immediate, forceful and targeted actions by the Fed, FDIC and Treasury. In our view, the Fed’s Bank Term Funding Program (“BTFP”) seems a well-tailored and appropriate near-term liquidity solution that allows banks to obtain immediate liquidity, collateralized by the par value of securities, to meet any near-term deposit outflows. At the time of this writing, early signs are that the deposit flight from regional banks is calming rapidly and depositor psychology is improving, though this could change. To the extent that calming continues, our suspicion is that there may be very attractive bargains to be had among regional banks. More will be known in the coming days and weeks as information regarding deposit flows emanates post-quarter end. That said, there will remain some mystery around the extent of the bargains on offer because increases in FDIC funding, increases in regulatory capital requirements, more stringent liquidity stress testing, and changes to the list of banks subject to G-SIB regulatory regimes are all on the table now. It is also very likely that deposit costs, which had been rising very slowly, will rise much more rapidly as commercial banks work harder to entice depositors to stay put. None of these developments, if they eventuate, are likely to impact banks’ returns and earnings in a positive way.

More broadly, the Third Avenue Value Fund owned investments categorized as financials totaling 15.94% by weight, at quarter end. This category includes non-bank financials such as Old Republic, a U.S. property and casualty insurer and title insurance business, Lazard, an advisory business and asset management firm, and Ashmore, a U.K. asset management firm specializing in emerging markets credit. The Fund’s actual bank exposure at quarter end totaled 9.52% and comprises Bank of Ireland, Deutsche Bank and Comerica, in order of position size…” (Click here to read the full text)

1. First Horizon Corporation (NYSE:FHN)

Number of Hedge Fund Holders: 50

PE Ratio as of March 4: 9.38

Average Upside Potential: 12.87%

Average Analyst Price Target: $16.31

First Horizon Corporation (NYSE:FHN), operating as the bank holding company for First Horizon Bank, offers diverse financial services. The company’s operations are divided into Regional Banking and Specialty Banking segments, providing general banking services to consumers, businesses, financial institutions, and governments. First Horizon Corporation (NYSE:FHN) is one of the most undervalued stocks to buy. On January 24, the company declared a quarterly dividend of $0.15 per share, in line with previous. The dividend is payable on April 1, to shareholders on record as of March 15. The company also announced that its board has granted authorization for the repurchase of common stock worth $650 million. 

According to Insider Monkey’s fourth quarter database, 50 hedge funds were bullish on First Horizon Corporation (NYSE:FHN), compared to 48 funds in the prior quarter. Israel Englander’s Millennium Management is the largest stakeholder of the company, with 12 million shares worth $170.4 million. 

ClearBridge Small Cap Value Strategy made the following comment about First Horizon Corporation (NYSE:FHN) in its Q2 2023 investor letter:

“The financials sector was also a positive contributor to relative outperformance during the quarter as fears of further contagion of March’s bank crisis eased and allowed for a rebound in many of the higher-quality small and regional banks caught up in the panic. For example, as investor pessimism dissipated, Bank OZK exceeded analyst expectations and raised its quarterly dividend, highlighting continued improvement in its net interest income margin in the first quarter. We capitalized on the retreat in bank stocks early in the quarter to initiate a new position in regional bank First Horizon Corporation (NYSE:FHN), which reflected a unique opportunity to buy a bank with an extremely strong capital and liquidity profile at a distressed value after its deal to be acquired by Toronto Dominion was canceled through no fault of First Horizon. While we continue to be vigilant for signs of further deterioration in the sector, we have high conviction in our holdings and believe that they will continue to be positive contributors to our long-term performance.”

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