While the increase in interest rates has investors worried, the bottom line is that it is in part due to one of the strongest economies the United States has seen in years. Unemployment is at the lowest level in almost 50 years, wages are increasing and many top companies are struggling to find competent and qualified workers. So while the increase in rates draws headlines, and has weighed on the stock market, it is actually a positive.

One sector that benefits from the increase in rates is the financials, especially the big money center banks. The increase in rates helps drive gains from net interest margin. Net interest margin is typically used for a bank or investment firm that invests depositors’ money, allowing for an interest margin between what is paid to the bank’s client and what is made from the borrower of the funds.

While stocks prices have soared, the top financials have struggled this year and look like a solid place for investors now. We screened the Merrill Lynch research universe for top stocks in the sector rated Buy and found four that look like solid picks for growth accounts now.

Citigroup

Shares of this top bank have traded down over 15% from highs posted in January. Citigroup Inc. (NYSE: C) has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. It provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services and wealth management.

Trading at a still very cheap 9.25 times estimated 2019 earnings, the stock looks very reasonable in what is becoming a pricey stock market. A continuing stock buyback program at the bank is also positive.

The banking giant reported weaker-than-expected quarterly revenue. The company’s earnings per share, however, handily topped estimates.

Citigroup investors are paid a 2.51% dividend. The Merrill Lynch price target for the stock is $84. The Wall Street consensus price objective is $84.76, and the shares were trading early Tuesday at $72.10.

Goldman Sachs

This stock trades at a very reasonable 9.35 times estimated 2019 earnings, and it is a member of the Merrill Lynch US 1 list. Goldman Sachs Group, Inc. (NYSE: GS) has a gigantic institutional equity, debt and derivatives business, an ultra-high net worth clientele, top investment banking and capital markets expertise. The firm continues to be a dominant force around the world, one of the most sought-after banks one of the very few firms that dictate who can be a client.

In investment banking, the company has the preeminent client franchise. Goldman Sachs advised on more than $1.5 trillion of announced mergers and acquisitions transactions last year, the highest level the bank has ever recorded. It also has maintained a leading market share over the past 25 years.

Second-quarter profit surged 40% year over year, exceeding analysts’ estimates on better-than-expected revenue from every major business with the exception of trading. Three of the bank’s four main businesses all posted surprisingly strong results, thanks to higher private equity gains and fees from equity issuance.

Goldman Sachs shareholders are paid a 1.35% dividend. Merrill Lynch has a $280 price target for the stock, and the posted consensus price target is $275.78. The stock was trading at $223.15 early Tuesday.

JPMorgan

This stock trades at a very reasonable 11.3 times estimated 2019 earnings and also could respond well in a rising rate scenario. JPMorgan Chase & Co. (NYSE: JPM) is one of the leading global financial services firms and one of the largest banking institutions in the United States, with about $2.6 trillion in assets. The company as it is today formed through the merger of retail bank Chase Manhattan and investment bank J.P. Morgan.

The firm has many operating divisions, including investment and corporate banking, asset management, retail financial services, commercial banking, credit cards and financial transaction services. Earnings were outstanding, and the analysts remain very positive on the shares for the balance of 2018.

JPMorgan investors are paid a 2.8% dividend. The $132 Merrill Lynch price objective compares with the consensus price target of $121.65, as well as the recent share price of $113.95.

Wells Fargo

This large cap bank remains a solid value play for 2018, though it may face the possibility of some additional large fines. Wells Fargo & Co. (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.8 trillion in assets. The company provides banking, insurance, investments, mortgage and consumer and commercial finance through 8,700 locations, 12,800 ATMs, the Internet and mobile banking. It also has offices in 36 countries to support customers who conduct business in the global economy. Wells Fargo serves one in three households in the United States.

Wells Fargo has slowly, but surely, become one of the biggest mortgage lending companies in the United States, in addition to its normal banking and brokerage businesses. A continued increase in commercial real estate lending could really boost the bank’s bottom line and overall revenue. The company trades at 10.85 times estimated 2019 earnings.

Wells Fargo shareholders are paid a decent 3.23% dividend. Merrill Lynch has set its price target at $68. The consensus price target was last seen at $62.34, and the shares traded at $53.05 Tuesday morning.

All four of these top financial stocks are trading well below their 52-week highs, and all boast extremely reasonable valuations. They make good sense for growth portfolios looking to add solid companies that have the potential for good moves higher over the fourth quarter and into 2019.

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