The uncertainty surrounding the economic impact of the sars coronavirus crisis, with near-historically low interest rates prompted investors to avoid regional bank stocks like the plague so far this year. The battered group has plunged 40% in 2020 compared to the S&P 500 year-to-date (YTD) decline of about 9%.
While smaller financial institutions does indeed face difficult times to come, the regional banks, sit well-placed to ride on the pandemic due to risk reduction measures implemented in the wake of the 2007 to 2009 financial crisis. “The banks have put more emphasis on the limits of concentration of the banking relationship and profitability to be volume-driven,” an analyst from Wedbush Peter Winter wrote in a note cited by Barron s.
In addition, as economic conditions improve, the three regional banks discussed below may see a continuation of the progression given that they trade at attractive price-to-book ratios (P/B ratios) compared to their rivals. From a technical point of view, each stock moved more than technique during Friday’s trading session. Let’s look at each question in more detail.
Regions Financial Corporation (RF)
Birmingham, Alabama-based Regions Financial Corporation (RF) provides banking and bank-related services to individual and enterprises, primarily in the Southeast and Midwest united States. In the framework of a three-year plan of the growth strategy announced last year, underlining the bank maintain healthy capital levels to help it to outperform in the evolution of the operating environment. The company has a P/B ratio of 0.62, well below regional banks industry average of 0.80. Trading at $10.32 with a $9.90 billion dollars of market capitalization and offering a 6.01% dividend, Regions Financial stock has plummeted nearly 40% YTD as of May 11, 2020.
The bank’s shares have been traded within an ascending channel since the low of March 19. In addition to encouraging price action, the stock rallied nearly 5% Friday, from the lowest tend to close above the 50-day simple moving average (SMA). Those who buy at these levels should place a stop-loss order under this month’s low of $9.62 and eyes up to $13, where price is the major resistance from a horizontal line that connects several prominent swing lows over the last year.
Citizens Financial Group, Inc. (CFG)
With a market capitalization of $9.47 billion and offering a market beating 7.03% dividend yield, Citizens Financial Group, Inc. (CFG) provides retail and commercial banking services to customers primarily in the New England, Mid-Atlantic, and Midwest. The bank continues to focus on the growth of its balance sheet and managing expenses, putting him in a position of strength as conditions stabilize in the second half of the year. It has a P/B ratio of 0.46, well below its five-year average of 0.80. The citizens Financial stock has declined over 40% year-on-year, but recovered 10% over the last month, as of May 11, 2020.
Like the Regions, the Citizens ‘ share price has remained entrenched in an ascending channel since March. Last week retracement to the lower trend line and subsequent close above 50-day SMA to provide active traders with a high probability entry point. Those who buy here should set a take-profit order of around $30.50 – an area on the map which meets the overhead resistance from the horizontal of the curve and a slope of 200-day SMA. Exit long positions if the stock fails to hold the psychological $20 level.
The PNC Financial Services Group, Inc. (PNC)
The PNC Financial Services Group, Inc. (PNC) operates as a diversified financial services company offering retail banking services, institutional banking services, asset management and residential mortgage banking. Japanese investment bank Nomura Holdings upgrade of the PNC stock to “buy” from “neutral” in April, saying that the actions of the bank have taken into account the degree of PNC will be under-earning its long-term potential by 2020. Although the firm has the highest P/B ratio of the three stocks to 0.90, the metric is still 26% below its five-year average. May 11, 2020, PNC Financial shares, with a market value of $44.56 billion and trades 32.76% lower YTD. Investors also receive a 4.38% dividend yield.
PNC shares have continued their grind higher within a rising wedge over the last six weeks. A Friday rally from the lower model of the curve, coupled with a convincing close above 50-day SMA, opens the way for a test of August 2019 swing low, at the $120 level in the medium term. Manage the risk by placing a stop below the rising wedge and the amendment of the ordinance for the threshold of profitability if the price closes above the April high at $112.90.