One metric that Wall Street analysts often count on when doing their work on various sectors is comparable periods in the past. The reason is that often cycles occur where they can look to the past for performance while comparing current statistics that match those in previous years. That is exactly what is happening in the banking sector now, and the analysts at RBC say that the bank stocks need to be bought and owned now.

The RBC team notes in a new research report that the set-up for the banking sector is very similar to the period from 1994 to 1998. During that time, which had some outstanding years for the S&P 500, the banks produced solid outperformance. With the Federal Reserve apparently done cutting interest rates, the similarity between then and now is striking.

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The analysts noted this in the report:

The Federal Reserve indicated that it would not engage in further interest rate increases for the remainder of 2019. While the Federal Reserve’s decision comes on the heels of sluggish economic reports, we remain constructive on the overall macro picture, and contend that banks are positioned to perform well in the current environment. We believe that for many market participants, current expectations are anchored in the recency of the 2004-2006 period, despite the dissimilarity of the current period with the former, in our view. Looking back at prior interest rate cycles, we believe the current environment shares more in common with 1994-1998 than 2004-2008.

While the RBC analysts like the entire sector now, these five top companies are the favorites. All are rated Outperform.

Bank of America

The company posted solid third-quarter results and is one of the top picks across Wall Street now. Bank of America Corp. (NYSE: BAC) is a ubiquitous presence in the United States, providing various banking and financial products and services for individual consumers, small and middle market businesses, institutional investors, corporations and governments in the United States and internationally. It operates some 5,100 banking centers, 16,300 ATMs, call centers and online and mobile banking platforms.

The bank reported that third-quarter net income rose 4% to $7.5 billion. The adjusted net income of $0.56 a share exceeded the consensus estimate of analysts surveyed by Refinitiv. Three of the bank’s four main divisions reported gains in revenue, led by its global banking business, with an 8% increase to $5.2 billion on higher investment banking fees.

Bank of America investors receive a 2.17% dividend. The RBC price target for the shares is $35, and the Wall Street consensus price target is $33.58. The stock closed Thursday at $33.23.

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 2.69% dividend. RBC has a $76 price target, though the consensus target is $83.56. Shares closed at $75.81 on Thursday.

This top super-regional bank 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.

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

Shareholders receive a 3.15% dividend. The $32 RBC price target compares with a $31.20 consensus target. The stock last traded at $30.51.

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 are positive metrics for the bank. It reported non-interest income of $650 million for the third quarter of 2019, which compared to $609 million for the same quarter of last year.

Investors receive a 3.83% dividend. RBC has set its target price at $22. The consensus target is $19.65, and shares closed at $19.30.

PNC Financial

This top regional bank is perhaps one of the best banking plays now. PNC Financial Services Group Inc. (NYSE: PNC) is one of the largest U.S. diversified financial services organizations and the sixth-largest U.S. bank by deposits, with $382 billion in assets.

PNC provides retail and business banking; residential mortgage banking; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; and wealth management and asset management. With consistent earnings growth and a very positive and growing loan portfolio, the company is a premiere super-regional bank stock to own.

PNC posted a better than expected third-quarter profit, boosted by higher loan growth. The bank’s loan portfolio grew 6.5% to $237.4 billion, with commercial lending accounting for about 67% of total loans. The company remains one of the largest local U.S. lenders by assets, and it said net interest income rose 1.5% to $2.50 billion, as higher loans and lower borrowing costs offset lower interest rates.

Shareholders receive a 3.01% dividend. The RBC price target is $150. The consensus target is $149.88, and PNC closed at $153.07 a share.

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With the results for the third quarter posted, and the sector still seemingly out of favor with many portfolio managers, it makes sense to look at some of these outstanding companies. They all pay dependable dividends, so the total return potential combined with a degree of safety makes them good additions to long-term growth accounts, especially given the potential for the sector to outperform going forward.

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