The banking sector has taken a hit this year. Now the stocks are starting to look like bargains. We found six with strong prospects. By Paul R. La Monica
Bank stocks have trailed the market this year as concerns about private credit and the impact of the Iran war on the U.S. economy have weighed on the sector.
As a result of these worries, the State Street SPDR S&P Bank exchange-traded fund has fallen nearly 5% in 2026, compared to the S&P 500's 2.9% decline, while big institutions, including Wells Fargo, Bank of America, and JPMorgan Chase, have all fallen more than 10%.
Nicholas Colas, co-founder of DataTrek Research, said in a recent report that investors shouldn't be too nervous about the recent weakness in the sector. "Bank stocks do not currently signal any truly damaging spillover from the problems in private credit or higher oil prices into the U.S. economy," he wrote. "Yes, they have experienced some underperformance over the last month, but that will have to get much worse before this group sends out a broader 'sell' signal."
Indeed, bank stocks are starting to look like bargains. The State Street SPDR S&P Bank and State Street SPDR S&P Regional Banking ETFs trade for less than 10 times earnings estimates for the next 12 months. That is a larger than typical discount to the broader market, and a slightly bigger than usual haircut relative to their own average multiples over the past 10 years.
Banks should also benefit from the continued capital markets boom on Wall Street, with merger activity and initial public offerings lifting fee revenue. Many will benefit from their own acquisitions. Regional banks could also get a boost from increased demand for loans, especially if the Federal Reserve resumes its rate-cutting cycle later this year. There are also growing hopes that regulators in Washington will relax the most onerous of bank capital requirements that had been instituted since the 2008-09 financial crisis.
Here are six bank stocks that should thrive in this environment.
Barclays
British banking giant Barclays trades for only seven times earnings estimates. But analysts at J.P. Morgan expect "a very manageable impact" from the minimal amount of exposure to private credit in the bank's portfolio.
Barclays is also benefiting from the M&A and IPO comeback. It posted an 11% increase in investment banking profits last year. And the bank remains confident that it will be able to return more capital to shareholders through dividends and share buybacks over the next few years.
BOK Financial
Worries about spiking oil prices due to the Iran war have boosted market volatility, but the Tulsa, Okla.-based regional bank BOK Financial should get a lift if energy costs remain elevated. Analysts at Wells Fargo said in a report this month that BOK will be "perceived to be more oil exposed than most mid-cap banks, and higher energy prices could be viewed favorably for its borrowers and economic footprint."
Investors seem to have caught on to this fact. Shares are up more than 5% this year. But BOK still trades for less than 13 times earnings estimates, a reasonable valuation that leaves room for upside.
Canadian Imperial Bank of Commerce
Canadian Imperial Bank of Commerce is another play on oil, and the Toronto-based bank also looks attractively valued, trading for just under 13 times earnings estimates for the next 12 months. The stock has held up well amid the recent market volatility, rising 8% so far this year. The momentum should continue.
CIBC is benefiting from increased loan demand from its Canadian consumer and business banking customers and is also getting a boost from its global investment banking unit. First-quarter results were lifted by higher stock and commodities trading as well as more equity and debt underwriting. Analysts are forecasting annual earnings growth of nearly 13% for the next few years.
Capital One Financial
The regional banking and credit-card leader Capital One Financial should continue to benefit from synergies with Discover Financial Services following their $35 billion merger last year. Wall Street is predicting that earnings per share will increase more than 20% in 2027.
The Discover deal makes Capital One a major rival to payments leaders Visa and Mastercard by giving the bank its own network. But Capital One trades at a big discount to both. It's valued at less than nine times earnings estimates for the next 12 months, compared with 23 and 25 for Visa and Mastercard, respectively.
Citigroup
The Big Four U.S. banks have lagged behind the market this year in large part due to private credit concerns, with Citigroup's shares down nearly 7%. But Citi CEO Jane Fraser thinks it's unfair to paint the sector with a broad brush. She said at a RBC Capital Markets conference in March that she's "more sanguine on private credit," adding that while there may be "some idiosyncratic risk," it's not "a systemic issue."
Analysts at Truist Securities said in a recent report that Citi should also get a lift from the boom in deals and new stock issuance. The bank looks attractive at just 10 times earnings estimates, a discount to JPMorgan Chase, Bank of America, and Wells Fargo, as well as Goldman Sachs Group and Morgan Stanley.
Fifth Third Bancorp just completed its more than $12 billion merger with regional banking rival Comerica in February. Like Capital One, the bank should be able to generate significant savings. Justin Bergner, a portfolio manager at Gabelli Funds, and Bill Smead, chairman and chief investment officer at Smead Capital Management, both cite the stock as a pick thanks to the potential for merger synergies. Smead says there's a chance to "shed $850 million in expenses from overlapping costs."
Still, there's more to the Fifth Third story than lower expenses. J.P. Morgan analyst Vivek Juneja notes that commercial and industrial loan growth has started to pick up. He has an Overweight rating on Fifth Third and a price target of $50.50, 15% above current levels. And shares remain attractive, trading for just 12 times earnings estimates.
Write to Paul R. La Monica at paul.lamonica@barrons.com
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March 20, 2026 21:30 ET (01:30 GMT)
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