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Every U.S.-based bank received a non-objection from the Federal Reserve in terms of capital plans as part of the 2017 Comprehensive Capital Analysis and Review (CCAR), or stress test, Bank of America's Erika Najarian noted in a report.
Bank stocks have historically performed well post-CCAR but the outperformance relative to the broader market has also been short lived, Najarian stated. However, as part of the stress test banks have boosted their dividends and total payouts to 100 percent of earnings versus 85 percent last year. This will help drive book multiples higher moving forward, especially next year when the CCAR process will positively change.
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"With potential regulatory relief beginning to take shape, we think today's results should bolster banks' confidence in their ability to continue posting high payouts over time," the analyst wrote.
Related Link: Big Banks Come To The Fore After Fed Stress Test As The Market Climbs
Notable Stocks To Watch
Najarian continued with a list of bank stocks investors should follow after the completion of the stress test.
- Citigroup Inc (NYSE:C) could see a positive impact as it will return 11 percent of its market cap back to shareholders along with 124 percent of earnings.
- Regions Financial Corp (NYSE:RF) could see an "even greater impact" versus Citigroup as it's also returning 11 percent of its market cap to shareholders and 155 percent of earnings.
- Wells Fargo & Co (NYSE:WFC) could gain as concerns over a potential qualitative objection are likely to be short-term positive catalyst.
- JPMorgan Chase & Co. (NYSE:JPM)'s $19.4 billion stock buyback is notably above the Street's expectations for $14 billion.
- Huntington Bancshares Incorporated (NASDAQ:HBAN) earns the title as a "dividend outperformer" with a 42 percent payout.
- The following names outperformed and could reverse recent underperformance: Fifth Third Bancorp (NASDAQ:FITB), BB&T Corporation (NYSE:BBT), Citizens Financial Group Inc (NYSE:CFG) and Zions Bancorp (NASDAQ:ZION).
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.