While many people fret over the pace of the Federal Reserve interest rate hikes, the reality is the process may end up being much slower and much more measured than many are anticipating. While many of the Wall Street firms we cover here at 24/7 Wall St. anticipate as many as three rate hikes, one major firm sees just one.

In a new research report, Deutsche Bank thinks gross domestic product (GDP) growth is way too slow for the Fed to be very aggressive. In fact, it may be so slow they predict just one more rate hike in 2016, and most likely it would be 25 basis points, or one-quarter of 1%.

The Deutsche Bank report highlights three top bank picks for 2016, all of which make good sense for more conservative growth portfolios.

PNC Financial

This top regional bank is down over 10% in the past month. PNC Financial Services Group Inc. (NYSE: PNC) is one of the United States’ largest diversified financial services organizations, providing 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 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.

The Deutsche Bank team points to numerous positives, including the bank implementing huge cost savings plans. They point to the fact the bank highlighted up to $100 million of new savings earlier this year, as well as the bank’s outstanding credit/risk management and the limited exposure to the capital markets related areas.

The analysts also think the bank stands to benefit the most from the recent Fed rate hike, with a 10 basis point boost to net interest margin worth an estimated $85 million in new interest income. They also note that the bank has a $34 billion liquidity position, some of which they feel gets appropriated in coming quarters.

PNC shareholders receive a very solid 2.2% dividend. The Deutsche Bank price target for the stock is $101, while the Thomson/First Call consensus price target is $99.60. Shares closed Tuesday at $94.57.
U.S. Bancorp

This is another top super-regional bank that Deutsche Bank favors for 2016. U.S. Bancorp (NYSE: USB) had $419 billion in assets as of June 30, 2015, and it is the parent company of U.S. Bank National Association, the fifth largest commercial bank in the United States. The company operates 3,164 banking offices and 5,020 ATMs in 25 states, and it provides a comprehensive line of banking, investment, mortgage, trust and payment services products to consumers, businesses and institutions.

The Deutsche Bank team notes that the bank has underperformed other larger regional banks over concerns about lower revenue and higher expenses. They also point to the fact that it has no meaningful capital markets exposure and has among the best risk management/credit profile in the industry, and it generates the highest returns of peers

Deutsche Bank also feels that the 2015 headwinds should abate next year and point out that the bank’s management is committed to reducing expense growth. That in turn should lead to more revenue.

Investors receive a very solid 2.4% dividend. The Deutsche Bank price target is $47, and the consensus price objective is $46.75. Shares closed most recently at $42.70.

Wells Fargo

This large cap bank is another stock for investors to look at now for safety and dividends. Wells Fargo & Co. (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.8 trillion in assets. It provides banking, insurance, investments, mortgage and consumer and commercial finance through 8,700 locations, 12,800 ATMs, the Internet and mobile banking, and it 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 slowly but surely has 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. The analysts feel that could aid a big return in capital to shareholders. The stock also remains a top Warren Buffett holding.

Deutsche Bank likes the stability, yield and some asset sensitivity that the big bank offers, and investors looking to add financials to their portfolio could do well buying shares, knowing that the bank has little exposure outside of the United States. Next year could be a transitional year, with slow earnings per share growth, and expenses could run higher due to the GE acquisitions and tech and cyber upgrades.

Wells Fargo shareholders are paid a solid 2.76% dividend. The Deutsche Bank price target is $60, and the consensus target is $58.65. Shares closed Tuesday at $54.34.

These top bank stocks provide very solid total return potential. More conservative accounts looking to add new positions would be well served buying any of the three for 2016.

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