7 Bank Stocks That Make Great Long-Term Investments

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Bank stocks are generally seen as conservative investments. That simply means that these stocks skew more to the value side rather than the growth side of your portfolio. They aren't known for delivering spectacular annual stock price growth. But these stocks tend to pay safe dividends that give investors the benefit of compounding over time.

However, as the implosion of Silicon Valley Bank shows, a rising interest rate environment can affect the performance of some banks. This is because many banks hold some of their excess cash in long-term bonds which decline in price when interest rates rise. And if a bank has too much exposure to these long-term assets, it can create liquidity problems if consumers move their deposits to higher yielding treasuries.

But there are enough quality bank stocks available that you can find options that fit your portfolio without having to go beyond your normal due diligence. In this special presentation, we give you seven bank stocks that make great investments regardless of prevailing economic conditions.

#1 - JPMorgan Chase (NYSE:JPM)

Heading up this list of bank stocks to buy is JPMorgan Chase & Co. (NYSE: JPM). The bank has over $4 trillion in assets which makes them one of the largest financial services companies in the world.

While being considered a safe blue-chip stock, not even JPMorgan was immune to the sell-off in bank stocks in 2022. However, prior to a March sell-off, JPM stock was up approximately 6% in 2023. That sell-off puts the stock back to the middle of its 52-week range. Analysts give the stock a Moderate Buy rating with a price target of $!50.78 which is an upside of greater than 19%.

The fundamentals of JPM stock are also favorable. The stock trades at a price-to-earnings (P/E) ratio of 10.4x. That’s slightly higher than the sector average. But investors have been getting double-digit earnings growth for that premium in the last five years. And while higher interest rates may suppress earnings growth, investors get a sustainable dividend that currently pays out $4 per share on an annual basis.

About JPMorgan Chase & Co.

JPMorgan Chase & Co operates as a financial services company worldwide. It operates through four segments: Consumer & Community Banking (CCB), Corporate & Investment Bank (CIB), Commercial Banking (CB), and Asset & Wealth Management (AWM). The CCB segment offers deposit, investment and lending products, cash management, and payments and services; mortgage origination and servicing activities; residential mortgages and home equity loans; and credit cards, auto loans, leases, and travel services to consumers and small businesses through bank branches, ATMs, and digital and telephone banking. Read More

Current Price: $191.12
Consensus Rating: Moderate Buy
Ratings Breakdown: 13 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $192.05 (0.5% Upside)

#2 - Wells Fargo (NYSE:WFC)

Wells Fargo & Co. (NYSE: WFC) has been beset by a number of self-inflicted wounds in the past ten years. But the bank’s most recent earnings report showed that it remains well capitalized even as the bank sets aside more money in its loan-loss reserves. Like many banks, Wells Fargo anticipates that the economy may get worse before it gets better.

But with the stock trading for 7.8x forward earnings, investors are getting the stock at a slight discount to the overall sector. Analysts give WFC stock a moderate buy rating with a consensus price target of $52.09, a 37% gain from current levels.

One reason for that optimism may come from the company’s earnings. Even at the low end of its projected earnings, the company is expected to beat last year’s full-year earnings. Some of that optimism is based on the bank’s intention to dramatically shrink its mortage lending business as well as its entire lending portfolio.

About Wells Fargo & Company

Wells Fargo & Company, a financial services company, provides diversified banking, investment, mortgage, and consumer and commercial finance products and services in the United States and internationally. The company operates through four segments: Consumer Banking and Lending; Commercial Banking; Corporate and Investment Banking; and Wealth and Investment Management. Read More

Current Price: $59.48
Consensus Rating: Hold
Ratings Breakdown: 7 Buy Ratings, 12 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $58.85 (1.1% Downside)

#3 - Citigroup (NYSE:C)

Citigroup Inc. (NYSE: C) is the last of the “big banks” on this list. It's the only bank on this list without a Buy rating (it has a consensus Hold rating). That’s likely because there is some concern about the bank’s profitability metrics.

Citigroup scores lower than the sector average in profit margin, return on assets, and return on equity. The bank is also supposed to show tepid earnings growth of 0.95% over the next five years. And it has one of the higher debt-to-equity ratios in the sector.

However, the bank also trades at 7.4x forward earnings and a price-to-book (P/B) ratio of just 0.47. Combined with a dividend that looks very sutainable and has an attractive 4.61% yield and there are reasons to consider Citigroup.

Plus, prior to a March selloff in the entire banking sector, C stock was up approximately 15% in 2023. And analysts believe the stock will get beyond that level. They’ve assigned the stock a consensus price target of $56.47 which is a 27% gain from current levels.

About Citigroup

Citigroup Inc, a diversified financial service holding company, provides various financial product and services to consumers, corporations, governments, and institutions worldwide. It operates through five segments: Services, Markets, Banking, U.S. Personal Banking, and Wealth. The Services segment includes Treasury and Trade Solutions, which provides cash management, trade, and working capital solutions to multinational corporations, financial institutions, and public sector organizations; and Securities Services, such as cross-border support for clients, local market expertise, post-trade technologies, data solutions, and various securities services solutions. Read More

Current Price: $61.47
Consensus Rating: Moderate Buy
Ratings Breakdown: 10 Buy Ratings, 5 Hold Ratings, 1 Sell Ratings.
Consensus Price Target: $62.85 (2.3% Upside)

#4 - Goldman Sachs (NYSE:GS)

The Goldman Sachs Group, Inc. (NYSE: GS) makes this list even though it’s expected to take steps to make Marcus, its online banking unit, a less prominent part of the firm’s portfolio. Specifically, Goldman plans to issue fewer loans through the bank. But it has no plans to move away from its high-yield savings accounts.

That aside, Goldman Sachs has a Moderate Buy rating and a price target of $399.24 which is a 30% upside from the price of GS stock on March 17, 2023. Plus, the firm offers an attractive, and sustainable dividend with a current yield of 3.26% and an annualized payout per share of $10.

From a fundamental analysis perspective, Golman Sachs has an attractive P/E ratio of 10.2x and is expected to grow earnings at an average of 6% over the next five years.

About The Goldman Sachs Group

The Goldman Sachs Group, Inc, a financial institution, provides a range of financial services for corporations, financial institutions, governments, and individuals worldwide. It operates through Global Banking & Markets, Asset & Wealth Management, and Platform Solutions segments. The Global Banking & Markets segment provides financial advisory services, including strategic advisory assignments related to mergers and acquisitions, divestitures, corporate defense activities, restructurings, and spin-offs; and relationship lending, and acquisition financing, as well as secured lending, through structured credit and asset-backed lending and involved in financing under securities to resale agreements. Read More

Current Price: $425.66
Consensus Rating: Moderate Buy
Ratings Breakdown: 15 Buy Ratings, 5 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $437.04 (2.7% Upside)

#5 - U.S. Bancorp (NYSE:UBS)

The last three banks on this list fall into the category of regional banks. U.S. Bancorp (NYSE: UBS), which is the holding company for US Bank is the first on this list, and with good reason. The bank is known and respected for its conservative approach to growing its business.

At its core, banking is a boring business, and US Bancorp leans into that. That’s not a formula for eye-popping growth. But it’s a key reason why US Bancorp scores consistently well in return on assets (ROA).

Analysts may also like the fact that the bank recently completed its acquisition of Union Bank. This expands the company’s reach on the West Coat and adds $82 billion in deposits. The bank has been increasing its dividend for the last 11 years and sports a current yield of 5.77%. Whatever the reason for their outlook, analysts give the stock a price target of $54.83 which would be a 64% gain from its current price.

About UBS Group

UBS Group AG provides financial advice and solutions to private, institutional, and corporate clients worldwide. It operates through five divisions: Global Wealth Management, Personal & Corporate Banking, Asset Management, Investment Bank, and Non-core and Legacy. The company offers investment advice, estate and wealth planning, investing, corporate and banking, and investment management, as well as mortgage, securities-based, and structured lending solutions. Read More

Current Price: $26.17
Consensus Rating: Moderate Buy
Ratings Breakdown: 3 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: N/A

#6 - Fifth Third Bancorp (NASDAQ:FITB)

Prior to the March sell-off, Fifth Third Bancorp (NASDAQ: FITB) was off to a great start in 2023. FITB stock was up approximately 10% and analysts believe that the stock could climb to $40.90 which would be a 63% upside from its current price.

The bullish argument comes down to a critical metric for banks. That is tangible book value per share. Like many banks, Fifth Third had to buy some bonds to sop up its excess liquidity while loan demand was light. The bank designates the vast majority of those bonds as available-for-sale (AFS). That means the bonds are marked to market each quarter. In a rising interest rate environment, that means the bonds are bookd as an unrealized loss every quarter.

But just because the bank can sell the bonds doesn’t mean it will. And as long as the bank has no liquidity issues, it’s likely to recoup its losses when it holds the bonds to maturity.

About Fifth Third Bancorp

Fifth Third Bancorp operates as the bank holding company for Fifth Third Bank, National Association that engages in the provision of a range of financial products and services in the United States. It operates through three segments: Commercial Banking, Consumer and Small Business Banking, and Wealth and Asset Management. Read More

Current Price: $36.72
Consensus Rating: Hold
Ratings Breakdown: 6 Buy Ratings, 9 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $36.50 (0.6% Downside)

#7 - Citizens Financial Group (NYSE:CFG)

The last bank stock on this list Citizens Financial Group, Inc. (NYSE: CFG). Like most of the other stocks on this list Citizens Financial was up 12% before the March sell-off. One of the reasons to like CFG stock is its focus on improving its return on tangible common equity (ROTCE). This measures the performance and profitability of a bank and gives analysts a sense of how well it uses its capital. The bank has recently raised its ROTCE outlook to between 16% and 18%.

Citizens Financial Group has a Moderate Buy rating and a $48.17 consensus price target. That’s a 56% gain from the stock’s current level. The bank also sports a dividend with a dividend yield of 5.44% that looks safe with earnings expected to grow by approximately 14% in the next five years.

About Citizens Financial Group

Citizens Financial Group, Inc operates as the bank holding company that provides retail and commercial banking products and services to individuals, small businesses, middle-market companies, corporations, and institutions in the United States. The company operates in two segments, Consumer Banking and Commercial Banking. Read More

Current Price: $34.50
Consensus Rating: Hold
Ratings Breakdown: 7 Buy Ratings, 9 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $37.13 (7.6% Upside)

Many investors have never had to deal with how to invest in bank stocks in a rising interest rate environment. The onset of the financial crisis in 2008 sparked an unprecedented period of low interest rates and quantitative easing. Both of these monetary policy initiatives created a favorable environment for bank stocks.

That changed dramatically in 2022 as the Federal Reserve began a campaign of raising interest rates to tamp down inflation that soared to near 40-year highs. While investors won't be seeing a return to the 20% interest rates seen in the early 1980s, even rates over 5% will seem uncomfortable to a generation of investors accustomed to low rates.

And it may get uncomfortable for the banks as well. However, while there are likely to be some banks that don't survive this period of high rates, the banks on this list are well capitalized. In fact, many will benefit as depositors use them as a flight to safety for their capital.