Stock Analysis & Ideas

CFG, PNC, HBAN: Should You Buy the Dip in These Banking Stocks?

Story Highlights

Robert W. Baird analyst David George suggests buying the dip in CFG, PNC, and HBAN stocks on the back of improved NII and stable credit quality.

The weak macro environment has led to a correction in the shares of top regional banks in the U.S. However, improved NII (net interest income) trends, due to a rise in loans and deposits, and rising interest rates imply that better days are ahead for regional banks. Meanwhile, stable credit quality and operating leverage are positives. Against this background, Robert W. Baird analyst David George suggests buying the dip in the shares of Citizens Financial (NYSE:CFG), PNC Financial Services (NYSE:PNC), and Huntington Bancshares (NASDAQ:HBAN).

The analyst said, “Financials looking more attractive on recent pullback, outlooks fine so use weakness to selectively add to positions.”

However, before jumping to any conclusion, investors should note that big regional banks could soon deal with new rules that could add to their costs. 

Recently, the Wall Street Journal reported that a group of bank regulators is mulling implementing new rules requiring regional banks to add more capital cushion to their balance sheets. Said cushion could be used during times of distress. 

The report highlighted that just like large U.S. banks, regional banks could have to raise long-term debt that would act as a cushion in times of crisis. This would increase the cost of capital for these banks, as most of them currently fund their operations through their low-cost deposit base. 

While it is not known when the new rule will be implemented or how it will impact the regional banks, let’s look at these stocks individually and understand which regional banking stock is most likely to beat market expectations. 

Is Citizens Financial Group a Buy?

With $226.7 billion in assets (as of June 30, 2022), Citizens Financial Group stock commands a Strong Buy consensus rating on TipRanks based on 10 Buys and three Holds. CFG’s average price forecast of $46.85 implies upside potential of 27.1%. 

Along with analysts, CFG stock has positive signals from hedge funds and retail investors. While hedge funds bought 414,500 CFG stock last quarter, 2.2% of investors on TipRanks increased their holdings in the last 30 days.

CFG stock sports a ‘Perfect 10’ Smart Score on TipRanks, implying it has strong potential to outperform the market.

Is PNC a Good Stock to Buy?

With average total assets of $544 billion (as of June 30, 2022), PNC is one of the largest regional banks in the U.S.

PNC sports a Moderate Buy consensus rating on TipRanks, which is based on eight Buys, seven Holds, and one Sell. Further, PNC’s average price target of $185.87 implies upside potential of 13.5%.

While Street is cautiously optimistic about PNC stock, it has a Neutral Smart Score of six out of 10 on TipRanks, implying that the stock could perform in line with market averages.

Notably, hedge funds and insiders have reduced their holdings in PNC stock in the last three months. While hedge funds reduced their stake in the company by selling 23,200 PNC stock in the last quarter, insiders sold their shares worth $584,300 in the same period

Will Shares of Huntington Bank Go Up?

Given the near-term macro concerns, analysts see a limited upside in Huntington Bank stock over the next 12 months. 

HBAN’s average price prediction of $15.04 implies 9.7% upside potential. On TipRanks, HBAN stock commands a Moderate Buy consensus rating based on six Buys and seven Holds.

HBAN stock has an Underperform Smart Score of three out of 10 on TipRanks.

In the last quarter, hedge funds reduced their holdings in the company by selling 3.4M HBAN stock. Further, 1.6% of investors on TipRanks have sold HBAN stock in the last 30 days.

Bottom Line 

While improved NII, stable credit performance, rising interest rates, and operating leverage are likely to support the growth of the regional banks mentioned above, TipRanks’ stock comparison tool shows that CFG stock has a higher probability of outperforming its peers. 

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