Investing in Regional Banks: A Promising Opportunity

Investors are starting to take notice of the beaten-down banking sector, which is beginning to show signs of attractiveness. In an optimistic move, Citigroup analysts have initiated bullish coverage of several regional banks. They argue that despite the sector's challenges, a lot of the negative news is already reflected in the stock prices.

For the past two years, Wall Street has been predicting an economic slowdown, leading many traders to steer clear of bank stocks in anticipation of a wave of defaults. While there has been a slight increase in delinquencies from their pandemic lows, they remain relatively low when compared to historical standards. Moreover, experts believe that banks are well-prepared to handle any future challenges.

According to Citi analyst Keith Horowitz, now is the right time to invest in regional banks. He suggests that although it's usually advised not to buy banks until credit costs rise, the current market presents a highly attractive entry point.

Overall, given the compelling opportunities and undervalued nature of regional banks, now may be an opportune time for investors to consider adding them to their portfolios.

Horowitz's Coverage of Four Banks

Huntington Bancshares (HBAN) and Zions Bancorp (ZION)

Horowitz is highly optimistic about Huntington Bancshares (HBAN) and Zions Bancorp (ZION), awarding both banks a Buy rating. In the case of Huntington, Horowitz predicts a 15% increase in share prices, reaching $12 per share. He is particularly bullish about the bank's net interest income, expecting it to benefit from asset repricing and portfolio hedging against higher interest rates by 2025.

Regarding Zions, Horowitz acknowledges that the stock has suffered due to the collapse of Silicon Valley Bank. However, he believes the bank has already stabilized after adjustments to net interest income in recent quarters. With improved funding mix and fixed-asset repricing, Zions has the potential to grow. According to Horowitz, this growth could lead to a 17% increase in share prices, reaching his price target of $42.

First Citizens Bank (FCNCA) and New York Community Bancorp (NYCB)

On the other hand, Horowitz is less optimistic about First Citizens Bank (FCNCA) and New York Community Bancorp (NYCB). He has initiated coverage on both banks with a Neutral rating. While they have performed well this year after acquiring Silicon Valley Bank and Signature Bank at favorable terms from the government, Horowitz believes much of the potential upside has already been factored into their share prices.

In essence, Horowitz's coverage highlights the positive outlook for Huntington Bancshares and Zions Bancorp, while expressing caution towards First Citizens Bank and New York Community Bancorp.