Many on Wall Street seemed petrified of the prospect for rising rates. While the quantitative easing taper is likely to be started in November, most across Wall Street do not think the Federal Reserve will start to raise interest rates until 2023. Even if they raised them 25 basis points four times, that would still just put the federal funds rate at 1.25%. Recall that the rate before the housing and stock market collapse in 2008 was at 4.75%.

One industry that is fine with rates going higher is banking, which should see a big increase in net interest margin, or the ratio that measures how successful a firm is at investing its funds in comparison to the expenses on the same investments. In other words, offering bank customers a two-year certificate of deposit at 1% and using the deposit to buy a two-year Treasury that yields 1.26%. The bank pays the CD holder the 1% and collects the rest of the Treasury coupon. While these rates are nowhere near the current figures, the example shows how the banks make money.

Jefferies is positive on the banking industry and has five top dividend-paying stocks rated Buy. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Fifth Third Bancorp

This top super-regional bank stock remains incredibly cheap. Fifth Third Bancorp (NASDAQ: FITB) is a diversified financial services company headquartered in Cincinnati, Ohio, and the indirect parent of Fifth Third Bank, National Association, a federally chartered institution.

As of March 31, 2021, the company had $207 billion in assets and operated 1,098 full-service banking centers and 2,383 Fifth Third branded ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Georgia, North Carolina and South Carolina. In total, Fifth Third provides its customers with access to approximately 53,000 fee-free ATMs across the United States.

Fifth Third is among the largest money managers in the Midwest and, as of March 31, 2021, had $464 billion in assets under care, of which it managed $58 billion for individuals, corporations and not-for-profit organizations through its Trust and Registered Investment Advisory businesses.

The company posted very solid second-quarter results, and many feel that management’s guidance for the current quarter is very conservative.

Shareholders receive a 2.75% dividend. The Jefferies price target on Fifth Third Bancorp stock is $46. The Wall Street consensus target is $43.58, in line with the closing price on Tuesday of $43.57 a share.

This stock trades at a still reasonable 14.5 times estimated 2021 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.

Top analysts are very positive on JPMorgan, largely because the industry titan faces a continued broad recovery in nearly every aspect of its business. It has a leading M&A advisory and capital markets product set and market share. It has a massive footprint of corporate and commercial banking customers. And it has a sizable wholesale payments businesses. JPM has proven that it has the wherewithal to continually invest in people, products, and platforms to further its market share base, extending its competitive advantage versus most peers.

Second-quarter profit and revenue exceeded analysts’ expectations. The bank said the improving U.S. economic outlook drove its decision to release money set aside for loan losses, which came mostly from retail credit-card and mortgage reserves.

JPMorgan Chase stock investors receive a 2.41% dividend. Jefferies has a $177 price target, and the consensus target is $168.50. The shares closed at $166.08 on Tuesday.

KeyCorp

This is another top regional player that is very cheap at current levels. 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.

The stock modestly has outperformed its peers after posting solid second-quarter results with forward guidance relatively unchanged. The bank also successfully rolled out Laurel Road for Doctors, its national digital bank, adding 2,500 new clients.

Investors receive a 3.40% dividend. The $24 Jefferies target price compares with a $22.54 consensus target on KeyCorp stock, as well as Tuesday’s closing share price of $21.75.

This stock does a ton of business in the fast-growing southern and southeastern parts of the country. Regions Financial Corp. (NYSE: RF) provides banking and bank-related services to individual and corporate customers. It operates through the following three segments.

The Corporate Bank segment offers commercial banking services, such as commercial and industrial, commercial real estate and investor real estate lending; equipment lease financing; deposit products; and securities underwriting and placement, loan syndication and placement, foreign exchange, derivatives, merger and acquisition, and other advisory services. It serves corporate, middle market and commercial real estate developers and investors.

The Consumer Bank segment provides consumer banking products and services related to residential first mortgages, home equity lines and loans, branch small business and indirect loans, consumer credit cards and other consumer loans, as well as deposits.

The Wealth Management segment offers credit-related products and retirement and savings solutions, as well as trust and investment management, asset management and estate planning services to individuals, businesses, governmental institutions and nonprofit entities.

As of February 25, 2021, it operated 1,300 banking offices and 2,000 automated teller machines across the South, Midwest and Texas. Regions Financial was founded in 1970 and is headquartered in Birmingham, Alabama.

Investors receive a 3.15% dividend. Jefferies has set a $24 price target on Regions Financial stock. The consensus target is $22.67, and the final trade for Tuesday was reported at $21.58.

Wells Fargo

This large-cap bank is perhaps the best value play for 2021 and beyond. Wells Fargo & Co. (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.9 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.

The company posted second-quarter solid results and doubled the firm’s dividend, which now translates to a 1.74% yield for shareholders. The Jefferies price target for the money center giant is $52. The consensus price target is $50.31, and Wells Fargo stock closed at $45.92 on Tuesday.

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Five top banks to look at now are really value plays when compared to the very overbought and pricey stocks market as a whole. With earnings for the quarter expected to be solid, investors can feel good about adding positions in any of these top stocks now.

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