Yield Curve Normalization, Cheap Valuation, EPS Growth To Boost Banks In 2025: Truist Initiates Coverage On These 14 Regional Names

Analysts at Truist Securities initiated coverage on 24 large-cap, regional, and trust banks, as well as credit card companies. They anticipate strong earnings growth over the next two years, projecting an annual increase of 12-15% fueled by factors like improving loan growth, a steeper yield curve, and ample capital for expansion.

What Happened: Forecasting a favorable environment for banks in 2025 and 2026, the analysts at Truist foresee a less stringent regulatory environment, with more clarity and flexibility for banks regarding mergers and acquisitions, and the deployment of excess capital.

The note highlighted that the banking stocks were de-rated during the first two years of Trump 1.0 because the yield curve was flattened and late-cycle macro concerns surfaced, even as the administration enacted bank-friendly tax reform and regulatory tailoring. However, according to the brokerage, a little Fed easing and a steeper curve are necessary for the stocks to be re-rated and two rate cuts are expected in 2025, as hinted by Fed during their December meeting.

According to Truist, while bank valuations have increased, they remain relatively attractive compared to historical levels. They currently trade at a price-to-book value (P/TBV) below their post-financial crisis average, and at a significant discount to the broader market. The note adds that given the current market valuations, bank stocks appear undervalued relative to the S&P 500.

However, despite Truist beliefs that the sector offers attractive opportunities, careful stock selection is crucial according to them. “While we're not at ‘close your eyes and buy ‘em levels,’ we still see attractive opportunities across
the sector and view stock selection as increasingly important,” the note said.

See Also: Baby, It’s Cold Outside: These 5 Winter-Ready Stocks Have What It Takes To Make You Feel Warm And Cozy

Why It Matters: Truist’s coverage on 24 financial stocks is spread across three subgroups namely, large-cap, regional, and trust banks, which is initiated with a positive outlook.

Large-Cap Banks

The research note examines long-term investment potential of large U.S. banks as these institutions possess significant advantages, including, “embedded offense” with the presence of strong existing businesses and customer relationships.

It also anticipates cyclical tailwinds and capital leverage for such banks given a favorable economic environment and the ability to effectively utilize capital for growth.

These factors position large U.S. banks to achieve organic growth by the expansion of core businesses, double-digit earnings growth and an attractive returns on equity.

Large Cap Banks	Rating	Price Target
Bank of America BAC	Buy	$52
Citigroup C	Buy	$85
Wells Fargo WFC	Buy	$82
JPMorgan Chase JPM	Hold	$260
PNC Financial PNC	Hold	$215
US Bancorp USB	Hold	$54

Regional Banks And Cards

Truist also initiated coverage on 14 regional financial companies outlining three key strategies for regional banks to remain competitive.

• Differentiated Growth: Focus on unique and sustainable growth opportunities.

• Disciplined Capital Allocation: Efficiently deploy capital to support growth and enhance shareholder value.

• Navigating the Evolving Landscape: Adapt to changing market conditions, including interest rates, yield curve shifts, loan and deposit growth, and commercial real estate market dynamics.

Regional Banks	Rating	Price Target
Fifth Third Bancorp FITB	Buy	$51
Huntington Bancshares HBAN	Buy	$19
M&T Bank MTB	Buy	$233
Wintrust Financial WTFC	Buy	$151
Citizens Financial CFG	Hold	$49
Comerica Inc CMA	Hold	$65
First Citizens BancShares FCNCA	Hold	$2,303
KeyCorp KEY	Hold	$19
Regions Financial RF	Hold	$25

Cards	Rating	Price Target
Ally Financial ALLY	Buy	$42
American Express AXP	Buy	$350
Capital One Financial COF	Buy	$229
Discover Financial DFS	Buy	$233
Synchrony Financial SYF	Hold	$72

Trust Banks And Capital Markets

Truist anticipates gradual interest rate decreases, the eventual end of quantitative tightening, and a healthy economy and capital markets providing a competitive landscape to trust banks.

According to the analysts, investors should prioritize stocks with the potential for sustained operating leverage. Which is the ability to increase profitability significantly with relatively small increases in revenue. And stocks with strong capital returns, with high levels of income through dividends and share buybacks.

Trust Banks And Capital Markets	Rating	Price Target
Bank of New York Mellon BK	Buy	$91
Charles Schwab SCHW	Buy	$86
Northern Trust NTRS	Hold	$110
State Street STT	Hold	$106

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