As the S&P 500 finally breaks through to a new all-time high, many of the stocks in the venerable index are trading at valuations that are very stretched. After a very long 10-year and counting bull market, it is becoming ever harder for investors to find quality companies that still have reasonable valuations and solid upside potential. One group that remains incredibly cheap is the banks, and investors searching for ideas for the rest of the fourth quarter and 2020 may want to take a closer look.

The top 20 banks’ third-quarter results reflected healthy year-over-year earnings growth, robust capital positions, strong credit quality and continued expense management. In fact, in the third quarter, 15 of the top 20 banks came in with results that exceeded most Wall Street estimates. Despite the positive results, the group remains much underowned by portfolio managers.

We screened the Merrill Lynch banking research universe looking for stocks that were rated Buy and had solid potential for this quarter and 2020. We found four that look like outstanding companies for growth investors who may be adding new capital or rearranging portfolios. With a potential rate cut coming today, it may make sense to see what the Federal Open Market Committee does, and then step in.

Citigroup

This top bank has rallied since earnings were reported, but it is still offering a stellar entry point. 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 8.6 times estimated 2020 earnings, this one looks very reasonable in what remains a pricey stock market. A continuing stock buyback program at the bank is a strong positive. In addition, the company reported third-quarter earnings and revenue that topped projections as stronger-than-expected trading results made up for weaker lending margins.

Citigroup investors receive a 2.79% dividend. The Merrill Lynch price target for the stock is $78, while the Wall Street consensus price objective is higher at $82.85. The stock closed Tuesday’s trading at $73.09 per share.

Fifth Third Bancorp

This is a top super-regional bank that is incredibly cheap right now. Fifth Third Bancorp (NASDAQ: FITB) is a diversified financial services company and the indirect parent of Fifth Third Bank, an Ohio-chartered bank. As of June 30, 2019, Fifth Third had $169 billion in assets and operated 1,207 full-service banking centers and 2,551 ATMs with Fifth Third branding in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Georgia and North Carolina.

Fifth Third is among the largest money managers in the Midwest and, as of June 30, 2019, had $399 billion in assets under care, of which it managed $46 billion for individuals, corporations and not-for-profit organizations through its trust and registered investment advisory businesses.

Driven by higher mortgage banking revenues, Fifth Third delivered third-quarter 2019 positive earnings surprise of 2.7%. Adjusted earnings per share surpassed the consensus estimates of analysts. An increase in revenues, aided by expansion of margin and fee income growth, was a key positive. Moreover, the company displays a very strong capital position.

Shareholders of Fifth Third receive an attractive 3.24% dividend. The Merrill Lynch price target is set at $31, and that compares with a consensus target across Wall Street of $31.07. The stock was last seen trading at $29.19 on Tuesday.

This stock trades at a still reasonable 12 times estimated 2020 earnings. 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 was 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.

For the third quarter, JPMorgan blew away consensus estimates when it reported a profit of $5.71 billion, or $1.40 a share, against $4.26 billion, or $1.02 per share a year earlier. Revenue, which excludes the impact of credit-card securitizations, was up 6.1% to $25.86 billion.

JPMorgan investors are paid a 2.85% dividend. Merrill Lynch has a price objective of $125, while the posted consensus target price is $122.21. However, the shares closed on Tuesday above both levels at $126.43.

KeyCorp

This top mid-cap bank makes good sense for the fourth quarter and into 2020. KeyCorp (NYSE: KEY) operates as the bank holding company for KeyBank National Association, which provides deposit, lending, cash management and investment services to individuals, small and medium-sized businesses.

The company also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets banner.

With overall credit remaining solid, earnings and loan deposit and fee growth all are positive metrics for the bank. The company reported non-interest income was $650 million for the third quarter of 2019, which compared to $609 million for the same quarter of last year.

KeyCorp offers investors a solid 4.01% dividend. The $19 Merrill Lynch target price compares with the $19.65 consensus price target The shares closed most recently at $18.45 apiece.

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With the results in, and the sector still seemingly out of favor with portfolio managers, it makes sense to look at some of these outstanding companies. They all pay respectable dividends, so the total return potential combined with a degree of safety make them good additions to long-term growth accounts.

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