The world’s most important central bank says the biggest banks in the U.S. are in strong enough shape to withstand a potential economic slowdown. All 23 banks that the Federal Reserve subjects to its annual stress test passed the key evaluation after the market closed on Wednesday. The Fed’s stress test, which resulted from the global financial crisis of 2008, puts banks through a severe recession scenario to ensure that each can continue to operate and lend normally, even under extraordinary economic conditions. Still, most banks have a long way to go before their earnings and stock prices recover from a brief liquidity scare that surrounded the failure of Silicon Valley Bank, Signature Bank and First Republic earlier this year. The Invesco KBW Bank ETF , for example, is down more than 30% since New Year’s, while PacWest Bancorp has tumbled almost 65% and Western Alliance Bancorp by 39% year to date. Nonetheless, the stress test helped lift major banks stocks, including Wells Fargo and JPMorgan Chase , on Thursday. Then, on Friday, JPMorgan’s stock hit its highest level in more than a year. Against this backdrop, CNBC Pro screened the banks in the Invesco KBW Bank ETF to find those that might do well in the second half of the year, using the the following criteria: Each stock was in the KBW ETF. At least 55% of analysts rate the stock a buy. Analysts’ average price target implies at least 10% upside in each stock. Shares of Goldman Sachs have slipped more than 6% since the start of the year. The firm is fighting headwinds stemming from disagreements between Goldman partners and current Chief Executive David Solomon , as well as large losses from the 2021 purchase of GreenSky . Still, 56% of analysts polled by FactSet who cover Goldman Sachs rate it a buy, while its average price target implies roughly 19% upside from current trading levels. GS YTD mountain Goldman Sachs stock has slipped more than 5% from January. Phoenix-based Western Alliance , meanwhile, is 58% below its 52-week high. Despite the fallout from the regional bank turmoil that started in February, analysts are somewhat optimistic that Western Alliance began to turn back the bearish tide in May after a company update showed a promising uptick in deposits . Nearly 88% of analysts polled by FactSet who cover Western Alliance rate it as a buy, with its average price target implying more than 49% upside. WAL YTD mountain Western Alliance stock has slipped more than 38% so far this year. Wells Fargo stock has gained almost 3.5% in 2023 after climbing 3.4% on Thursday following the Fed’s stress test. Analysts are optimistic about the San Francisco-based lender, with 60% of those polled by FactSet rating Wells Fargo a buy. On average, their price targets, meanwhile, imply about 14% upside from the stock’s current trading levels. WFC YTD mountain Wells Fargo stock has climbed more than 3% so far in 2023.
Read the full article here
