8 of the Best Bank Stocks to Buy for 2023

After a rough year in 2022, bank stocks are now navigating a fresh minefield in 2023. Rising interest rates have triggered a sharp decline in long-term bond prices, resulting in massive losses for banks holding them on their balance sheets. As a result, U.S. regional banks Silicon Valley Bank and Signature Bank recently became the two largest U.S. bank failures since the 2008 financial crisis.

Investors are understandably concerned over liquidity issues and instability within the banking industry, but the sharp sell-off in bank stocks could also prove to be an excellent opportunity for investors to buy high-quality bank stocks for the long term.

Here are eight of the best bank stocks to buy in 2023, according to Bank of America analysts:

JPMorgan Chase & Co. (JPM)

JPMorgan is one of the largest global financial services companies, with nearly $4 trillion in assets. Analyst Ebrahim Poonawala says he prefers large-cap banks over U.S. regionals, but no banks will be safe if the macroeconomic backdrop worsens.

Poonawala says JPMorgan has best-in-class earnings diversification and top-tier execution. In addition, the company expects $12 billion in stock buybacks this year, supporting earnings per share. Poonawala says JPMorgan’s investments in digital banking and cutting-edge financial technology position it well for the future.

Bank of America has a “buy” rating and $158 price target for JPM stock, which closed at $138.73 on April 14.

Wells Fargo & Co. (WFC)

Wells Fargo is one of the largest U.S. banks, lending mostly within the U.S. market. Poonawala says Wells Fargo is attractively valued, priced roughly in line with its tangible book value per share.

He says Wells Fargo’s diversified loan book will help the bank manage credit risk, and Wells Fargo has a larger loan loss reserve cushion than other banks after management decided to hold onto some of its pandemic-era reserves. The removal of the bank’s Federal Reserve-imposed asset cap could also eventually be a significant bullish catalyst.

Bank of America has a “buy” rating and $47 price target for WFC stock, which closed at $39.64 on April 14.

Citigroup Inc. (C)

Citigroup is a diversified financial company that provides a wide range of banking services to global customers. Poonawala says Citigroup shares offer investors an attractive risk-reward skew with the stock trading at roughly half its tangible book value per share.

In addition, he says Citi’s divestment of its Banamex Mexico banking assets could be a positive catalyst for the stock. Poonawala says Citigroup’s lackluster return profile remains a risk if the global economy declines sharply, but the bank has limited downside risk to net interest income.

Bank of America has a “buy” rating and $58 price target for C stock, which closed at $49.56 on April 14.

M&T Bank Corp. (MTB)

M&T Bank is a U.S. regional, commercially focused bank offering banking, trust and investment services primarily in the Northeast and mid-Atlantic regions.

Poonawala says U.S. regional banks could see a bounce if first-quarter earnings numbers are better than feared, which was the case for M&T on April 17, and the bank remains one of his top regional bank stock picks. However, investors should temper future earnings expectations. Bank of America projects earnings per share of $14.76 in fiscal 2023 and $14.51 in fiscal 2024, more than 13% below consensus estimates in both years.

Bank of America has a “buy” rating and $141 price target for MTB stock, which closed at $116.59 on April 14.

Fifth Third Bancorp (FITB)

Fifth Third Bancorp is a U.S. regional bank that offers retail and commercial banking, consumer lending and asset management services in the Midwest and Southeast regions. Poonawala is bullish on Fifth Third’s digital strategy and market share growth in the Southeast.

In addition, he says the bank benefits from reshoring tailwinds and has hedges protecting net interest margins from potential interest rate cuts. Fifth Third shares are also attractively valued, trading at roughly 8.4 times Poonawala’s fiscal 2023 EPS estimate of $3.16.

Bank of America has a “buy” rating and $32 price target for FITB stock, which closed at $26.44 on April 14.

Citizens Financial Group Inc. (CFG)

Citizens Financial is a U.S. regional bank that operates in 11 states in the Northeast, mid-Atlantic and Midwest regions. Poonawala says Citizens has made significant progress improving its return on tangible common equity in the past two years, and he says the bank has multiple levers to offset rising deposit costs.

In addition, he says the bank is attractively valued. Citizens shares trade at just 6.6 times Poonawala’s fiscal 2023 EPS estimate of $4.44. Poonawala also forecasts $400 million in share buybacks per quarter this fiscal year.

Bank of America has a “buy” rating and $37 price target for CFG stock, which closed at $29.10 on April 14.

KeyCorp (KEY)

KeyCorp is a U.S. regional bank that provides consumer and commercial banking services, including real estate capital and investment banking, in the West, Midwest and Northeast regions.

KeyCorp may be particularly attractive for any bank stock investors looking to buy the dip following the recent crisis. The stock is down 30.6% through April 14 this year, the worst performance of any bank on this list. Poonawala says management’s focus on organic growth and its investments in digital banking are not fully reflected in its valuation.

Bank of America has a “buy” rating and $15 price target for KEY stock, which closed at $12.09 on April 14.

East West Bancorp Inc. (EWBC)

East West Bancorp is a regional commercial bank that has locations in both the U.S. and China, and provides consumer and commercial services.

Poonawala says investors do not fully appreciate East West’s best-in-class execution. The bank’s exposure to China has been an overhang for the stock going all the way back to the international trade war formed during former President Donald Trump’s administration, but Poonawala says China’s removal of COVID-19 lockdown restrictions and easing of regulatory crackdowns may finally lift that overhang.

Bank of America has a “buy” rating and $65 price target for EWBC stock, which closed at $52.49 on April 14.