10 U.S. Banking Stocks Likely To Benefit From An Expected Interest Rate Increase

U.S. Federal Reserve Chairwoman Janet Yellen hinted Tuesday during the semi-annual testimony submission to the Senate Banking Committee that interest rates may go up sooner than expected if the economy accelerated at a faster pace.

She added that if the inflation rate and labor market continue to improve more quickly than anticipated by the Fed then increases in the federal-funds rate would likely occur sooner and be more rapid than currently envisioned. 

However, she also added that the monetary policy would continue to be accommodative for some more time until the American labour market and hiring and wage data showed a steady growth. According to a recent Labor Department report, unemployment rate dropped to 6.1% in June, still below the Fed's estimate of a longer-run normal rate of 5.5 %. The current U.S. inflation stands at 1.8% while the Fed’s goal is 2.0% for the full year. The Fed expects to end in October its monthly purchases of mortgage and Treasury bonds that have pushed its holdings of bonds, loans and other assets to more than $4.4 trillion.

Today we have picked 10 U.S. banking stocks that are likely to benefit from the expected increase in interest rates in the near future, as banks can earn more on loans and credit card balances and, in turn, improve their margins. We note that these stocks have recorded growth in net interest income, strong net interest margins and offer attractive return on assets during 2013.

Moreover, these stocks are trading at low forward P/B multiple of under 2.0 and have low non-Performing Assets (NPA) in proportion to their total loans. We note that these stocks have recorded gains during the past 3 months with average daily traded volume in excess of 100,000.

Source: Bloomberg
NPA: Non-Performing Assets

Company Description:

Trustmark Corp TRMK 
Trustmark Corporation is the holding company for Trustmark National Bank. The bank offers a variety of banking, investment, and insurance solutions to corporate, institutional, and individual customers in Mississippi and Tennessee.

Talmer Bancorp Inc TLMR 
Talmer Bancorp, Inc. is a bank holding company. The company's banking subsidiaries bank accepts deposits and offers automobile, recreational, home equity, and business loans. Talmer Bancorp operates in Michigan and Wisconsin.

First Financial Northwest Inc FFNW 
First Financial Northwest, Inc. is a bank holding company. The company, through its banking subsidiary, provides a wide range of banking services, including checking and savings accounts.

BBCN Bancorp Inc BBCN 
BBCN Bancorp, Inc. is the holding company for BBCN Bank, a commercial bank that serves individuals and small- to medium-sized businesses. The bank accepts deposits and originates a variety of loans, and offers equipment lease financing and postdated check discount and factoring. BBCN Bank operates in California, New York, New Jersey, Washington, and Illinois.

Central Pacific Financial Corp CPF 
Central Pacific Financial Corp, through its Central Pacific Bank subsidiary, provides a variety of banking services and products. Services include personal and business deposit instruments, commercial and consumer loans, credit and debit card services, merchant services, traveler's checks, safe deposit boxes, and trust services. Central Pacific operates in Hawaii.

Hanmi Financial Corp HAFC 
Hanmi Financial Corporation is the holding company for Hanmi Bank. The bank is a business bank with its primary focus on servicing multi-ethnic small businesses in southern California. Hanmi's services include commercial small business association loans, trade finance, and consumer lending.

BankUnited Inc BKU 
BankUnited, Inc. is a bank holding company. The company, through its subsidiaries, provides a range of financial products and services, such as personal, commercial and business banking.

Pinnacle Financial Partners Inc PNFP 
Pinnacle Financial Partners, Inc. is a holding company for Pinnacle National Bank. The bank operates as a community bank emphasizing personal banking relationships with individuals and businesses located in its primary service area, which is comprised of the metropolitan Nashville, Tennessee area and surrounding counties.

ConnectOne Bancorp Inc CNOB 
ConnectOne Bancorp, Inc. is a community-based, full-service commercial bank holding company. The company concentrates on asset generation efforts in real estate, construction, business loans, and deposit accounts.

Prosperity Bancshares Inc PB 
Prosperity Bancshares, Inc. is the holding company for Prosperity Bank. The bank attracts deposits from the general public and uses those funds to originate a variety of commercial and consumer loans. Prosperity Bank operates in the greater Houston metropolitan area and neighboring counties in Texas.