Hometown Heroes: 3 Regional Banks Offering Outsized Potential

Industry Overview - Regional bank stocks have faced significant challenges this year due to soaring borrowing costs, which have negatively impacted net interest income, and the decline in value of older bonds due to higher yields [1] - The SPDR S&P Bank ETF is down 3% this year, indicating a lack of recovery in the sector [1] Investment Opportunities - Despite the broader market showing signs of recovery, bank stocks are expected to take longer to adjust, presenting a potential opportunity for investors [2] - High-quality regional bank stocks are currently undervalued and priced below book value, offering upside potential as market conditions stabilize [8] Citizens Financial Group (CFG) - Citizens Financial Group is highlighted as a top-value regional bank stock, with a price-to-book ratio of 0.72 and a forward dividend yield close to 5%, which can exceed 10% when including buybacks [4] - The bank benefits from a strong economic recovery in Rhode Island, where the labor market has dropped below 3% unemployment for the first time since 1988, supporting its operational outlook [5][9] KeyCorp - KeyCorp is positioned as an inexpensive bank stock with a focus on middle-market commercial banking in Ohio and New York, offering a 5.9% dividend yield [11] - Morningstar estimates KeyCorp's fair per-share value to be nearly 40% higher than its current trading price, indicating strong potential for growth [11] Valley National Bancorp (VLY) - Valley National Bancorp is noted for its compelling 6.7% dividend yield and unique access to the cannabis market, trading at just 0.57 times book value [12] - Analysts have set an average price target of $9.44 for Valley National, approximately 31% above its current share price, with a significant positive shift in analyst sentiment [13]