Analysts at the largest investment houses expect that in 2022 American banks and fintech companies will be able to make good profits thanks to the Fed’s rate hike. CNBC chose the most promising sector stocks for 2022
Bank stocks are the most sensitive to changes in interest rates and perform better than other industries during periods of their rise. Analysts of the largest investment houses expect that the US Federal Reserve will raise rates two or three times next year, and American banks and fintech companies will be able to make good money on this. CNBC has chosen the most promising securities of the sector for 2022.
Wells Fargo is the fourth-largest bank in the United States by assets, and it is the most sensitive to interest rates among large banks, according to Morgan Stanley analyst Betsy Gracek. “Wells Fargo is well positioned to monetize higher rates as cash accounts for 15% of profitable assets, up 7% from pre-pandemic levels,” Grasek said. – “This will provide a basis for the growth of loan portfolios and reinvestment
“. Morgan Stanley expects Wells Fargo shares to rise by 25% next year, to $ 61 per share.
Wells Fargo is also the favorite of Deutsche Bank analyst Matt O’Connor, who expects earnings per share to rise 25-30% over the next two years. According to O’Connor, the bank is in the “final stages” of resolving problems with US regulators caused by the fake accounts scandal in 2016. The bank expects Wells Fargo shares to rise to $ 55 (+ 13%) within a year.
According to JPMorgan analyst Vivek Junja, Bank of America will also get more profit due to higher rates next year. Like Wells Fargo, Bank of America has a huge share of US deposits thanks to its extensive branch network and well-established mobile banking products.
The analyst expects two Fed interest rate hikes next year to boost earnings per share in 2023 by an average 4.1% in the US banking sector, with Bank of America posting 5.1% profit growth. Junji’s target price for Bank of America shares is $ 50 per share. This is approximately 12% of the current level of the share price.
Charles Schwab (SCHW)
Retail broker Charles Schwab is the top choice among asset managers, according to Deutsche Bank expert Brian Bedell. He expects the sector to perform better in 2022 than in the past few years.
Brokerage Charles Schwab has increased its assets under management over the past two years, but revenue growth has been limited by the Fed’s low interest rates. Charles Schwab’s margins will improve as rates rise, Bedell said. The analyst sees upside potential for Schwab by almost 8% over the next 12 months, to $ 92 per share.
Vivek Junja of JPMorgan noted that US Bancorp’s share of credit card revenue is above the banking sector average. As the economy recovers, the bank should benefit more than other lending institutions, as consumer spending will normalize next year and the impact of the spread of the omicron variant of the coronavirus will weaken, he said. JPMorgan’s price target for US Bancorp is $ 73 per share, up about 29% above current levels.
Deutsche Bank’s O’Connor also sees US Bancorp as promising, citing an expected 8% increase in earnings per share as a result acquisitions the American division of Union Bank, which was owned by Mitsubishi UFJ Financial Group (MUFG). He recommends buying the bank’s shares with a target price of $ 68 (+ 20.6%).
Block is a Jack Dorsey-led fintech company formerly called Square. Its shares are down roughly 25% this year, along with some other high-tech companies. But according to BTIG analyst Mark Palmer, Block will benefit more from several trends in fintech. The company is at the forefront of digital players aspiring to become a one-stop retail banking application. In addition, it is likely to play a role in the further adoption of cryptocurrency. According to Palmer, Block’s recent acquisition of an installment payment service Afterpay for $ 29 billion gives him the opportunity to develop in the “buy now, pay later” segment.
According to analysts at Keefe, Bruyette and Woods (KBW), led by Sanjay Sahrani, in 2022, the company’s products for the provision of retail and retail banking services will be in high demand. Analysts believe that the recent pullback in the sector’s shares is an opportunity to buy securities at a more attractive price. ” Jefferies expects Block shares to grow in the coming year to $ 240 (+ 43%), Bank of America – to $ 221 (+ 32%), and BMO Capital Markets – to $ 253 (+ 51%).
According to KBW, the recent sell-off in payment companies has made the industry “more attractive than it has been for a long time.” Payment processors such as Mastercard and Visa are now trading at discounts ranging from 20% to 30% over historical multiples, analysts said.
According to KBW, in this area, the Mastercard payment network looks preferable to Visa, since the former has more opportunities for cross-border and international transactions. These types of payments should rebound as pent-up consumer demand will revive the travel sector. UBS expects Mastercard shares to rise to $ 448, that is, another 23%. In Bank of America – up to $ 416 (+ 14%), in Wells Fargo Securities – $ 430 (+ 18%).
Oppenheimer analyst Owen Lau has called Coinbase the top choice among stock exchange stocks as it will benefit from digital asset adoption, the development of DeFi protocols, and an increase in mergers in this space. He believes that an increasing number of companies will allow users to buy, sell and store bitcoins and other digital assets. In addition, he expects an increase in institutional investor interest in this asset class.
“We believe institutional investors are interested in accessing digital assets, and Coinbase is well positioned to benefit from this,” Lau said. “The digital asset sector is still in its infancy and many investors are still on the sidelines of this sector.” Goldman Sachs set a target price for Coinbase at $ 387 (+ 50%).
A financial instrument used to raise capital. The main types of securities: shares (grants the owner the right of ownership), bonds (debt security) and their derivatives.