The market has seen a remarkable recovery over the past few months, S&P500 The index reached an all-time high, confirming that a new bull market is underway in the stock market. This recent rally could result in inflated valuations for some stocks, making it difficult to find deals. Good news for you. There are still plenty of trades in today's market.
The recovery in bank stocks has been slow as the high interest rate environment poses a headwind for companies. However, there are at least three bank stocks that still trade at incredibly cheap valuations and have the potential to rise.
1. Citigroup
citygroup (New York Stock Exchange: C) is one of the largest banks in the United States, but has struggled in recent years as its focus on broader global operations has become too thin. Not only that, but a few years ago the bank was fined $400 million for deficiencies in internal controls, risk management, and data governance. As a result, Citigroup's performance struggled compared to its banking peers.
Due to its recent poor performance, Citigroup is trading at a very low price, a 33% discount to its tangible book value. In comparison, american bank and wells fargo They trade at a premium of 44% and 54% to book value, respectively.
Citigroup's low valuation is also an attractive factor. But Citigroup's reputation could improve even more if CEO Jane Fraser's guidance is implemented. Fraser took over as CEO in 2021 and laid out a plan to eliminate unprofitable businesses and focus on businesses that increase efficiency. As part of this move, the company announced it will downsize 13 global consumer franchises, reduce employees, consolidate operations and streamline operations.
Some analysts are very optimistic about the company's strategy. Wells Fargo analyst Mike Mayo, for example, thinks Citi's stock could reach $100 in the next three years. Citigroup has a lot of work to do, but its cheap valuation provides some margin of safety and looks like a good value stock to buy today.
2. Goldman Sachs
Rising interest rates have led to a slowdown in investment banking over the past few years. goldman sachs (NYSE:GS)one of the world's largest investment banks.
In 2022, rising interest rates created an atmosphere of uncertainty in markets such as initial public offerings (IPOs) and mergers and acquisitions, which are breadwinners for investment bankers. His IPO market over the past two years has been some of the lowest-volume years in the U.S., according to consulting firm PwC. The number of IPOs in the past two years totaled 175, which is significantly lower than his 2021, which had as many as 951 IPOs.
Goldman Sachs saw its investment banking revenue plummet 56% in the two years to 2023. It has also made other moves to consolidate its operations, including scaling back its consumer business, which has struggled in the past few years. The challenging environment makes it difficult to be optimistic about Goldman Sachs. The investment bank currently trades at a P/E ratio of 16.8x and a one-year forward P/E ratio of just 9.9x.
However, the IPO market is showing signs of booming, with Reddit, Stripe, and Klarna among the most anticipated IPOs likely to take place later this year. A successful launch could be a good sign that risk appetite is returning. If so, Goldman Sachs could be a great cheap stock to pick up today, before we see more activity.
3. Lending Club
lending club (NYSE:LC) is a consumer-focused lender that helps consumers refinance and consolidate debt into personal loans. With credit card debt exceeding $1.13 trillion and credit card interest rates near record highs, consumers are racking up debt.
This increase in consumer debt could create a huge opportunity for Lending Club. The company started as a peer-to-peer lending platform in his 2006, but transformed into a consumer lender and bank in 2021 after his acquisition of Radius Bancorp. As a result, the company holds approximately 15% to 25% of the highest quality loans. The loans on our books can generate net interest income in addition to the revenue we receive from originating and selling the remaining loans into the market.
“We have been preparing our personal loan franchise for historic refinancing opportunities ahead,” LendingClub CEO Scott Sanborn told investors. To that end, Lending Club is developing a product that allows members to roll their credit card balances into payment plans. In other words, customers can “top up” their existing personal loans, making it easier to manage their debt balances.
Especially if interest rates fall, consumers may consolidate their loans, benefiting Lending Club's core business. If so, now is a great time to stock up on stock ahead of this historic refinancing opportunity, with the stock priced at an 18% discount to tangible book value and a forward P/E ratio of 11x. there is a possibility.
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Bank of America is an advertising partner of The Motley Fool's Ascent. Wells Fargo is an advertising partner of The Motley Fool's Ascent. JPMorgan Chase is an advertising partner of The Motley Fool's Ascent. Citigroup is an advertising partner of The Motley Fool's Ascent. Courtney Carlsen has a position in her LendingClub. The Motley Fool has positions in and recommends Bank of America, Goldman Sachs Group, and JPMorgan Chase. The Motley Fool has a disclosure policy.
3 Incredibly Cheap Bank Stocks to Buy Now Originally published by The Motley Fool
