Throughout stock market history there have been few occasions when the words 'hot' and 'banks' go together, but this is one of those times. With the Dow Jones Regional Banks Index up around 25% year-to-date, regional bank stocks have been among the hottest groups this year.
As the consumer and commercial lending environments improve and interest rates creep higher, investors are suddenly taking an interest in regional banks. There are about a dozen regional bank stocks that have soared at least 50% in 2021. Here we highlight a few of the names that are well-positioned to keep trending higher.
What Makes Triumph Bank a Fintech Stock?
After advancing 28% in both 2019 and 2020, Dallas-based Triumph Bancorp (NASDAQ:TBK) has surged 87% in 2021 outpacing every single member of the S&P 500 index. The stock's 10-month winning streak has picked up steam in recent weeks after the company announced plans to acquire HubTran, a provider of cloud-based solutions that automate repetitive back office functions for the transportation industry.
The move was atypical of a regional bank but Truimph Bancorp is not your ordinary bank. In addition to offering traditional community banking, lending, and commercial finance products through its 60 Midwestern and Southwestern branches, Triumph is heavily involved in the transportation sector. It is one of the country's top providers of factoring services and payment solutions to transportation companies.
The Triumph Business Capital division specializes in invoice factoring, a financial transaction that occurs when a company sells its account receivables to address near-term cash needs. Customers in transportation, energy, manufacturing, and other industries often engage in this practice. Then there is TriumphPay, the company's billing and payments platform that shippers and freight brokers use to process and settle payments for both ground and air transportation sales.
It is Triumph Bank's unique exposure to the transportation industry that has helped it stand out from regional banking peers. Its technology solutions hold strong potential for growth as business activity rebounds in oil-centric Texas and its surrounding states. The Business Capital and TriumphPay brands are a nice complement to the slow-growth nature of the traditional banking and insurance sides of the business. In a way, Triumph Bank is as much of a fintech play as a regional bank play. Both are good places to be these days.
How Were Signature Bank's Q1 Earnings?
Signature Bank (NASDAQ:SBNY) has rallied 75% already this year in conjunction with expectations of a sharp turnaround in its financial performance. After profits fell more than 8% last year, analysts are banking on the New York City-based company to post 22% profit growth in 2021.
Gradually improving net interest income (NII) is part of the story but there is more to it. Signature Bank has returned to growth mode by opening new divisions, expanding its employee count, and investing in its online banking offerings.
More than 90% of the business is commercial banking which includes a range of lending activities in the reinvigorated metropolitan New York market. As economic activity has rebounded in and around Manhattan, Signature Bank's balance sheet has strengthened thanks to strong loan growth particularly in the commercial real estate and multi-family property markets. More recently, an uptick in industrial activity has spurred strong demand for Signature's industrial lending products.
On April 21st, Signature Bank reported stellar first-quarter results that send the stock up another 10%. Earnings per share of $3.24 trounced the Street's estimate of $2.85 thanks to 17% growth in both NII and deposits.
Sell-side analysts have been unanimously bullish on Signature Bank stock with all 16 firms calling it a buy. Look for target prices to get once again bumped higher after the strong Q1 statement.
Will Western Alliance Stock Keep Going Up?
Western Alliance Bancorporation (NYSE:WAL) isn't up as much as Triumph and Signature but its 65% year-to-date return is nothing to sneeze at. The Phoenix-based regional bank, which serves commercial customers in Arizona, California, and Nevada, has delivered some strong results of late.
In the first quarter, EPS more than doubled year-over-year to $1.90 due to loan growth, PPP loan fees, and lower loss rates as the economy became healthier. The performance was no surprise to Western Alliance shareholders who are familiar with the company's strong balance sheet and exposure to some of the most attractive commercial banking regions in the country.
The bank continues to find success being 'everything to everyone' serving small businesses and large corporate customer alike across a wide range of industries. Last year Western Alliance was among Forbes magazine's "Top 10 Banks in America" for the fifth consecutive year.
In February 2021 Western Alliance shares found another gear after the company announced the acquisition of national mortgage company AmeriHome. The addition is not only expected to enhance Western Alliance's B2B mortgage acquisition and servicing platform but produce more than 30% of earnings accretion in 2022. The move was also a natural fit because AmeriHome has been a Western Alliance client for the past four years.
Western Alliance stock also has a bullish technical pattern going for it. Earlier this month a continuation wedge formed on the daily chart when the stock was trading around $93. If the uptrend resumes as the wedge suggests, the stock could be headed to the $105 to $108 range by next month.
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