Credit Suisse Has 3 Regional Bank Stocks to Buy

By Jon C. Ogg Published Sep 14, 1:35PM EDT

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With the Federal Reserve likely about to embark on the coming and eventual interest rate hike cycle, many investors are wondering which banks they should be looking at and which ones they should be avoiding. After all, there are decent dividend yields, and there is a chance that some outfits could have substantially better operating results in the years ahead than the years past.

Credit Suisse has run a screen of regional and super-regional banks, noting three with Outperform ratings. Four other banks had Neutral ratings and one had an Underperform rating.

BB&T Corp. (NYSE: BBT) comes with an Outperform rating at Credit Suisse, with a $48.00 price target. That is handily higher than the $36.44 most recent close. Credit Suisse noted that BB&T’s shift toward higher-yielding loan categories will continue to help with 3% to 5% organic loan growth this coming quarter alone. The report noted that BB&T managed spreads flat in the second quarter when the environment continues to be very competitive. Its prime auto lending segment has seen tight pricing, and the company is targeting lower volume expectations with an aim to lower its exposure unless spread opportunities change. The firm likes that BB&T is focusing on higher yielding categories while it continues to let the residential mortgage portfolio run off.

BB&T shares were last seen up 0.2% at $36.52, versus a consensus analyst price target of $43.37 and a 52-week trading range of $34.50 to $41.90. At the same time, the company has a dividend yield of about 3%.

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KeyCorp (NYSE: KEY) also had its Outperform rating maintained at Credit Suisse. The firm’s price target of $18.00 was handily higher than the prior $13.51 closing price. Despite net interest margin pressure, the firm likes KeyCorp’s management and valuation. The report noted that KeyCorp is enhancing its front line distribution capabilities in the corporate bank and the community banking space. Investment banking fees are also expected to rise. Another boost is that more bankers are being added across the franchise.

Shares of KeyCorp were up 0.9% at $13.62. It has a dividend yield of 2.2%. The consensus analyst price target is $16.24, and the 52-week trading range is $11.55 to $15.70.

Zions Bancorp. (NASDAQ: ZION) was also maintained as Outperform. The price target of $38.00 is almost $10 higher than the prior close of $28.34. Credit Suisse thinks that Zions’ net interest margin will improve along with a higher balance sheet efficiency. The consolidation of seven bank charters into one should be under $1.6 billion in total to consolidate back office efforts. More internal investing and select branch closures are expected to increase efficiencies as well. Credit Suisse also noted that Zions plans to moderately extend the duration of its investment portfolio by moving cash into mortgage-backed securities and interest rate swaps.

Zions’ shares were down 0.3%, at $28.25 in its 52-week range of $23.72 to $33.03. The bank has a dividend yield of nearly 0.9%, and the consensus price target is $34.21.

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About the Author Jon C. Ogg →

Jon Ogg has been a financial news analyst since 1997. Mr. Ogg set up one of the first audio squawk box services for traders called TTN, which he sold in 2003. He has previously worked as a licensed broker to some of the top U.S. and E.U. financial institutions, managed capital, and has raised private capital at the seed and venture stage. He has lived in Copenhagen, Denmark, as well as New York and Chicago, and he now lives in Houston, Texas. Jon received a Bachelor of Business Administration in finance at University of Houston in 1992. a673b.bigscoots-temp.com.