Amid the artificial intelligence (AI) boom of the past year, the financial sector has largely remained out of the limelight - which can be viewed as a positive development, after the regional banking crisis that sparked the Silicon Valley Bank and First Republic Bank collapses during early 2023. More recently, though, bank stocks struggled through a choppy Q2 earnings season, as investors focused an unforgiving eye on lower net interest income results for many lenders.
As a result, analysts at KBW believe many bank stocks are now bargain-priced. Analyst Matthew Kelley, who defines “oversold” in this case as cheap relative to the company's balance sheet value and earnings power, called out five names in particular that have a favorable risk/reward setup right now.
#1. American International Group
Founded in 1919 and based out of New York City, American International Group (AIG) is a global insurance corporation that provides a wide range of insurance products and services, including property casualty insurance, life insurance, retirement products, and financial services. It operates in various segments, including General Insurance, Life and Retirement, and Global Commercial and Consumer. AIG's market cap currently stands at $46.8 billion.
AIG stock is up 6.9% on a YTD basis. Notably, it also offers a dividend yield of 2.08%.
Overall, analysts have a rating of “Moderate Buy” for AIG stock, with a mean target price of $85.06, which denotes an upside potential of about 17.4% from current levels. Out of 17 analysts covering the stock, 9 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating, and 6 have a “Hold” rating.
#2. Essent Group
Established in 2009, the Essent Group (ESNT) is a mortgage insurance company. It provides private mortgage insurance (PMI) to lenders, protecting them against potential losses in case of borrower default. Its market cap is currently at $6.3 billion.
ESNT stock is up 12.5% on a YTD basis, and it offers a dividend yield of 1.8%.
On average, analysts have deemed ESNT stock a “Moderate Buy” with a mean target price of $65.11, which denotes an upside potential of about 9.5% from current levels. Out of 10 analysts covering the stock, 5 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating, and 3 have a “Hold” rating.
#3. Corebridge Financial
Corebridge Financial (CRBG) is a life insurance and retirement savings company. The Indianapolis-based outfit offers a range of products and services, including life insurance, annuities, and retirement savings plans. Essentially, the company helps individuals and businesses prepare for their financial future. Corebridge currently commands a market cap of $15.2 billion.
On a YTD basis, CRBG stock is up 18.9%. The stock also offers a healthy dividend yield of 3.68%.
Overall, analysts have a consensus rating of “Moderate Buy” for CRBG, with a mean target price of $33.08, which denotes a decent upside potential of about 28.6% from current levels. Out of 15 analysts covering the stock, 8 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating, and 5 have a “Hold” rating.
#4. Popular
Founded in 1893, Popular Inc (BPOP) is a leading financial services holding company with a focus on the retail and commercial banking markets. It offers a wide range of financial products and services, including deposit accounts, loans, mortgages, wealth management, and insurance. The company operates primarily in Puerto Rico, the U.S. Virgin Islands, and the Dominican Republic.
With a market cap of $6.8 billion, the company's stock is up about 16% on a YTD basis. BPOP also offers a dividend yield of 2.56%.
Analysts consider BPOP stock a “Moderate Buy” overall, with a mean target price of $109.88. This denotes an upside potential of roughly 15.3% from current levels. Out of 8 analysts covering the stock, 4 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating, and 2 have a “Hold” rating.
#5. LPL Financial Holdings
We conclude our list with LPL Financial Holdings (LPLA), a California-based financial services company that supports independent financial advisors. It provides a platform for advisors to offer investment advice and products to their clients. Essentially, LPL acts as a broker-dealer and custodian, offering technology, research, and administrative support to financial advisors.
Commanding a market cap of $14.5 billion, LPLA stock has nosedived 13.9% on a YTD basis. Notably, the stock offers a modest dividend yield of 0.62%.
However, analysts remain cautiously optimistic about LPLA stock, which has an average rating of “Moderate Buy” with a mean target price of $291.27. This indicates an impressive upside potential of about 47.9% from current levels. Out of 13 analysts covering the stock, 7 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating, 3 have a “Hold” rating, and 1 has a “Strong Sell” rating.
