When interest rates are going up, I always think it’s a good idea to take a closer look at bank stocks to buy. That’s because they have a better chance of turning a profit in a rising interest rate environment. When the Federal Reserve raises rates, the net interest margin also goes up. Net interest margin is the difference between interest banks earn on assets and what it pays to depositors and creditors in interest.
Of course, rising interest rates are only one factor in bank activity these days. You can’t assume every institution is going to profit equally from a rising interest rate environment. And don’t forget there are plenty of other pressures on the economy, such as Russia’s invasion of Ukraine, high energy prices and the moratorium on federal student loan payments.
Oppenheimer analyst Chris Kotowski is pretty bullish on banks right now. He says loan growth and rising interest rates are generally good for these picks. And if the economy would actually fall into a recession, today’s banking industry “would handle it better than any recession in history.”
So, what are the best bank stocks to buy right now? To answer that, I screened for U.S. bank picks that have a consensus “buy” rating or better from the analysts that cover them. I also looked for stocks that offer a dividend to investors.
Bank of America (BAC)
Could Bank of America (NYSE:BAC) use some good news? Definitely. BAC stock is down nearly 24% this year. That’s even after a pretty good earnings report, in which it beat analysts’ expectations by posting revenue of $23.2 billion. The experts had predicted $23.1 billion. Earnings per share (EPS) was 80 cents, which was better than the 75 cents EPS that analysts had expected.
Analysts have a consensus price target of $48.28, which is 36% better than the current price. Plus, BAC stock offers a dividend of nearly 2.5%.
Need more convincing? Bank of America is one of Warren Buffett’s favorite stocks, being the second-largest holding in Berkshire Hathaway’s (NYSE:BRK.A, NYSE:BRK.B) portfolio.
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