Three Affordable Bank Stocks Worth Investing in Today

Three Affordable Bank Stocks Worth Investing in Today

The market has seen an impressive recovery in recent months, with S&P500 the index reaches historic highs which confirm a new bull market is underway in stocks. With this recent rally, valuations for some stocks could be stretched, making it more difficult to find deals. Good news for you: there are still plenty of deals on the market today.

Bank stocks have been slow to recover in a high interest rate environment, which has been a headwind for businesses. However, there are at least three bank stocks that are still trading at incredibly low valuations and could be on the verge of taking off.

Three Affordable Bank Stocks Worth Investing in Today

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1. Citi Group

Citi Group (NYSE:C) is one of the largest banks in the United States, but it has struggled in recent years because its vast global business operations have spread it too thin. Additionally, 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 has struggled relative to that of its banking industry peers.

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Due to its recent history of underperformance, Citigroup trades at a very low 33% relative to its tangible book value. In comparison, Bank of America And Wells Fargo are trading at a premium of 44% and 54% to book value, respectively.

Citigroup’s cheap valuation is one aspect that makes it attractive. However, CEO Jane Fraser’s advice, if implemented, could give Citigroup a higher valuation. Fraser took over as CEO in 2021 and outlined plans to eliminate less profitable operations while focusing on those that will boost its efficiency. As part of this move, the company announced the closure of 13 global consumer products franchises, reduction of its workforce, consolidation of its operations and streamlining of its activities.

Some analysts are rather optimistic about its strategy. For example, Wells Fargo analyst Mike Mayo believes that Citi’s stock price could reach $100 in the next three years. Although Citigroup has its work cut out for it, its cheap valuation provides some margin of safety and makes it a good value stock to buy today.

2. Goldman Sachs

Rising interest rates have dampened investment banking activity in recent years, impacting Goldman Sachs (NYSE:GS)one of the largest investment banks in the world.

In 2022, rising interest rates have created uncertainty around markets, including those for initial public offerings (IPOs) and mergers and acquisitions, two primary activities for investment bankers. IPO markets over the past two years have been among the weakest in the United States, according to consulting firm PwC. In total, there have been 175 IPOs over the past two years, well below 2021, which saw a whopping 951 IPOs.

Revenue at Goldman Sachs’ investment bank fell 56% over two years ending in 2023. The company has also taken other steps to shore up its operations, such as exiting its consumer business, which has been struggling since several years. The challenging environment makes it difficult to be optimistic about Goldman Sachs. Today, the investment bank trades at 16.8 times earnings and just 9.9 times forecast profit in one year.

However, the IPO markets are showing signs of life, with Reddit, Stripe and Klarna among the most anticipated IPOs that could take place later in the year. If they launch successfully, it could be a good sign that risk appetite is returning. If so, Goldman Sachs looks like a great stock to buy today before we see another uptick in activity.

3. Lending Club

Loan Club (NYSE:LC) is a consumer-focused lender that helps consumers refinance their debt and convert it into personal loans. With credit card debt surpassing $1.13 trillion, consumers have racked up debt at a time when credit card interest rates are near an all-time high.

This growing consumer debt could create a huge opportunity for Lending Club. The company began as a peer-to-peer lending platform in 2006, but transformed into a consumer lender and bank following the acquisition of Radius Bancorp in 2021. As a result, it owns approximately 15 to 25% of its highest quality titles. loans on its books, which can generate net interest income in addition to the income it earns for originating and selling its remaining loans in the market.

LendingClub CEO Scott Sanborn told investors, “We are preparing our personal loan franchise to meet the historic refinancing opportunity ahead. » To do this, Lending Club develops products that allow members to integrate their credit card balances into payment plans. In other words, customers can “top up” an existing personal loan, making it easier to manage their debt balance.

Consumers can consolidate their loans, especially if interest rates fall, benefiting LendingClub’s core business. If so, now could be a great time to acquire shares, which are cheaply priced at an 18% discount to tangible book value and 11 times forward earnings, ahead of this historic refinancing opportunity.

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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Citigroup is an advertising partner of The Ascent, a Motley Fool company. Courtney Carlsen has positions in LendingClub. The Motley Fool holds positions 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 was originally published by The Motley Fool

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