Banking News 2016
Due to low interest rates in 2015 there has been some pressure on banking revenue and profits. Nonetheless, according to Fidelity Investments, banks have bested the decline in the S&P 500. But the scenario could have been different, if not for the Federal Reserve's interest of rates late in 2015.
And taking into account the statement made by Fed Chair, Janet Yellen concerning gradual rate increases in 2016 banks which have been performing well in 2015, should continue to do well.
A bank stock to consider in 2016 is Well Fargo, which was down 1% in 2015, and who is a leading lender of mortgage loans. Wells Fargo should do much better in the years ahead. The main reason is because interest rates have a direct impact on the credit market. And with improving interest rates it will be easier for mortgage providers to generate higher returns due to higher revenue and fees.
For the same reasons, it's hard to pass by the attractiveness of JPMorgan Chase's shares. JPM stock was one of very few to climb more than 5% in 2015. It outperformed even the Dow Jones Industrial Average and the S&P 500. JPM was on top of the game among the four banks that are too bif to fail, which are Citigroup, WellsFargo and Bank of America. JPMorgan also has a solid 44-cent dividend per quarter that yields 2.6% per year. For the year 2016 earnings are to climb even further up to 12% a share. Now is the time to buy as much of JPMorgan shares as possible as analysts have reached a consensus of a 12% gain with a price target of $73. Its current level is $66 per share.
The rise in interest rates is also beneficial for smaller regional banks. You can have a look at any well-performing small bank in your region and be secure that it is very likely to perform well in 2016 as well. For instance, SunTrust Bank was up 1.5% in 2015) and analysts predict a 12-month gain up to $46, an 8% gain its current levels. It's not a large premium, but some predict it to grow to get with S&P with a projectile of a return of 40% higher in 2018. A good long-term investment by all means.
These same metrics can be applied to other local banks, like Fifth Third Bancorp, which was slightly down in 2015, as well as BB&T. These are the two local names to put on your watch-list in 2016. We are sure that that after some extra research investors can find other small banks, which should be the key driving force of the banking sector in 2016, while large banking corporations struggle with their long-term problems. With larger banks that lost ground in 2015, traders should express extreme caution, but for the names mentioned above. Not everybody can afford loosing money, and if not much is to be made in the large banking sector, at least your investments can be preserved.