Federal Reserve Chair Jay Powell finally has decided to get tough with inflation. After years of zero interest rates, and constant stimulus, things are going to change. The market is now expecting three interest rate hikes in both 2022 and 2023 and an increase in the quantitative easing tapering to $30 billion per month, and that number could also be headed higher soon. After painting itself into a corner, the Federal Reserve is forced to fight its way out now.

One industry that loves rising interest rates is banking, as interest rates and bank profitability are connected. When interest rates are higher, banks make more money, by taking advantage of the difference between the interest banks pay to customers and the interest the bank can earn by investing. In addition, higher interest rates mean banks can charge more in their loan portfolios.

We screened our 24/7 Wall St. research database looking for banks stocks rated Buy that also pay the highest solid and dependable dividends. When you combine the positives of rising interest rates, continued reopening growth, the banking industry could be poised for some outsized total return, especially after lagging badly in 2021. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Citigroup

This top bank has rallied off its lows but looks poised to move higher in 2022. Citigroup Inc. (NYSE: C) is a leading global diversified financial service company that provides consumers, corporations, governments a broad range of financial products and services.

Citigroup offers services such as consumer banking and credit, corporate and investment banking, securities brokerage, transaction services and wealth management. It operates and does business in more than 160 countries and jurisdictions in North America, Latin America, Asia and elsewhere.

Trading at a still very cheap 7.7 times estimated 2022 earnings, this company looks very reasonable in what remains a volatile stock market and in a sector that has lagged dramatically.

Investors receive a 3.39% dividend. D.A. Davidson has an $84 price target, while the consensus target is $82.81. Citigroup stock closed trading on Thursday at $61.07 a share.

This remains a top financial pick across Wall Street. Citizens Financial Group Inc. (NYSE: CFG) operates approximately 2,700 ATMs and 1,000 branches in 11 states in the New England, Mid-Atlantic and Midwest regions, as well as through online, telephone and mobile banking services, and it maintains approximately 130 retail and commercial non-branch offices.

The company operates in two segments. The Consumer Banking segment offers traditional banking products and services, including checking and savings accounts, home and education loans, credit cards, business loans, mortgage and home equity lending and unsecured product finance and personal loans, as well as wealth management and investment services to retail customers and small businesses. This segment also provides indirect auto finance for new and used vehicles through auto dealerships.

The Commercial Banking segment offers various financial products and solutions, such as loans and leasing, trade finance, deposit and treasury management, cash management, and foreign exchange and interest rate risk management solutions. It also provides loan syndications, corporate finance, merger and acquisition, and debt and equity capital markets capabilities.

Shareholders receive a 3.31% dividend. The BofA Securities price target for Citizens Financial stock is $55, and the consensus target is $55.44. The shares closed on Thursday at $47.12.

KeyCorp

This top regional player is quite 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 third-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.

KeyCorp stock investors receive a 3.38% dividend. The $29 Wedbush price target compares with a $25.57 consensus price target and Thursday’s close at $23.32 a share.

Regions Financial

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 3.11% dividend. Morgan Stanley has set a $30 price target. The consensus target for Regions Financial stock is $26.13, and shares ended Thursday at $21.96.

U.S. Bancorp

This top super-regional bank is another of the higher-paying dividend bank stocks. U.S. Bancorp (NYSE: USB): provides various financial services in the United States through a network of 2,434 banking offices, principally operating in the Midwest and western regions of the United States, as well as through online services and a network of 4,232 ATMs.

The company offers depository services, including checking accounts, savings accounts and time certificate contracts; lending services, such as traditional credit products; and credit card services, lease financing and import/export trade, asset-backed lending, agricultural finance and other products. It also provides ancillary services comprising capital markets, treasury management and receivable lock-box collection services to corporate customers; and a range of asset management and fiduciary services for individuals, estates, foundations, business corporations and charitable organizations. In addition, the company offers investment and insurance products to its customers principally within its markets, as well as fund administration services to a range of mutual and other funds.

U.S. Bancorp also provides corporate and purchasing card and corporate trust services, and merchant processing services, as well as cash and investment management, ATM processing, mortgage banking and brokerage and leasing services.

Shareholders receive a 3.21% dividend. Jefferies has a Wall Street high $71 price target. The consensus target is $67.06, and U.S. Bancorp stock closed at $57.43 a share on Thursday.

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The Federal Reserve is way behind the curve, and despite offering some positive forward-looking comments this week, the reality is the problems in the economy and the soaring inflation, which is at the highest level in 40 years, will not be going away anytime soon. These top banks are among the best ideas for growth and income investors looking for where to move capital and resources in 2022 and all five pay at least a 3% dividend.

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