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S&P 500 Banks Perform Well in 2024: 5 Stocks Worth Considering
BKThe Bank of New York Mellon(BK) ZACKS·2024-12-30 17:56

S&P 500 Performance - The S&P 500 Index rallied 26 2% year to date in 2024 driven by optimism regarding the Federal Reserve's interest rate cut trajectory robust economic growth and a solid rebound in the capital market business [1] Banking Sector Overview - The S&P 500 Banks Industry Group Index rose 18 7% in 2024 with several banks outperforming the broader index including Goldman Sachs Bank of New York Mellon Wells Fargo JPMorgan Chase and M&T Bank [10] - The Federal Reserve cut interest rates by 100 basis points in 2024 with the latest cut on Dec 18 2024 bringing the Fed fund rates to 4 25-4 5% [12] - Global M&A deal value increased 15% in 2024 to 345trillionrecoveringfromadecade−lowin2023[13]−DonaldTrump′sre−electionandexpectedexpansionaryeconomicpoliciesincludingreducedcapitalrequirementsderegulationandrelaxedfiscalpoliciesareexpectedtosupportthebankingsector[15]−TheFederalReserveexpectstolowerinterestratestwicein2025andtwoadditionaltimesin2026bringingtherateto343 45 trillion recovering from a decade-low in 2023 [13] - Donald Trump's re-election and expected expansionary economic policies including reduced capital requirements deregulation and relaxed fiscal policies are expected to support the banking sector [15] - The Federal Reserve expects to lower interest rates twice in 2025 and two additional times in 2026 bringing the rate to 3 4% by the end of 2026 [16][17] Goldman Sachs (GS) - Goldman Sachs' net interest income (NII) reached 6 47 billion in the first nine months of 2024 reflecting a 29% increase from the same period in 2023 [3] - The Zacks Consensus Estimate for the company's earnings per share for 2024 and 2025 is pegged at 3705and37 05 and 43 04 respectively implying increases of 62% and 16 17% [4] - Investment Banking revenues increased 24% in the first nine months of 2024 as global M&A bounced back [20] - The company's cash and cash equivalents were 155billionasofSept302024withtotalunsecureddebtof155 billion as of Sept 30 2024 with total unsecured debt of 325 billion [22] - Goldman Sachs increased its common stock dividend by 9 1% to 3pershareinJuly2024andrepurchasedapproximately3 per share in July 2024 and repurchased approximately 6 billion worth of its common shares in the first nine months of 2024 [22] Bank of New York Mellon (BK) - Non-U S revenues constituted 35% of total revenues in the first nine months of 2024 [5] - The company hiked its quarterly cash dividend by 12% to 47 cents per share in June 2024 and announced a share repurchase program worth 6billioninApril2024[6]−TheZacksConsensusEstimateforthecompany′searningspersharefor2024and2025ispeggedat6 billion in April 2024 [6] - The Zacks Consensus Estimate for the company's earnings per share for 2024 and 2025 is pegged at 5 84 and 661respectivelyimplyingyear−over−yearincreasesof15646 61 respectively implying year-over-year increases of 15 64% and 13 15% [27] - The company's total debt was 52 7 billion as of Sept 30 2024 significantly lower than its cash and due from banks and interest-bearing deposits of 1085billion[25][26]WellsFargo(WFC)−WellsFargo′sCEOexpressedconfidenceinthebank′sprogresstofixcomplianceproblemsfollowingitsyears−longfakeaccountscandal[7]−Thecompanyannouncedadividendhikeof14108 5 billion [25][26] Wells Fargo (WFC) - Wells Fargo's CEO expressed confidence in the bank's progress to fix compliance problems following its years-long fake account scandal [7] - The company announced a dividend hike of 14% to 40 cents per share in July 2024 and had the authority to repurchase up to 11 3 billion of common stock as of Sept 30 2024 [8] - Wells Fargo's NII increased 10% in the first nine months of 2024 contributing to the continued expansion of overall revenues [30] - The company's liquidity coverage ratio was 127% as of Sept 30 2024 with liquid assets totaling 1855billion[31]−TheZacksConsensusEstimateforthecompany′searningspersharefor2024and2025ispeggedat185 5 billion [31] - The Zacks Consensus Estimate for the company's earnings per share for 2024 and 2025 is pegged at 5 28 and 549respectively[32]JPMorganChase(JPM)−JPMorgan′sInvestmentBankingfeesincreased335 49 respectively [32] JPMorgan Chase (JPM) - JPMorgan's Investment Banking fees increased 33% in the first nine months of 2024 driven by a strong capital market performance [33] - The company's NII rose 3% in the first nine months of 2024 from the same period in 2023 [36] - JPMorgan announced plans to open more than 500 branches by 2027 and renovate 1 700 existing locations by 2027-end [37] - The company's total debt was 850 1 billion as of Sept 30 2024 with cash and due from banks and deposits with banks totaling 4343billion[38]−TheZacksConsensusEstimateforthecompany′searningspersharefor2024and2025ispeggedat434 3 billion [38] - The Zacks Consensus Estimate for the company's earnings per share for 2024 and 2025 is pegged at 18 82 and 16 77 respectively [39] M&T Bank (MTB) - M&T Bank's revenues saw a CAGR of 10 2% over the past five years (2018-2023) [34] - The company's total debt was 14 2 billion as of Sept 30 2024 significantly lower than the cash and due from banks and interest-bearing deposits at banks of 266billion[41]−Thecompanyhikeditsquarterlydividendsby426 6 billion [41] - The company hiked its quarterly dividends by 4% to 1 35 per share in May 2024 and repurchased 3 8 million shares of its common stock in the first nine months of 2024 [42] - The Zacks Consensus Estimate for the company's earnings per share for 2024 and 2025 is pegged at 1462and14 62 and 16 41 respectively [43]