As Wall Street looks to extend gains in the new year, Keefe, Bruyette & Woods pegs financial stocks, including Synchrony Financial and Citigroup, as some of the firm's top picks for 2025. Despite some lingering questions about the Federal Reserve's forward path this year with rates, stocks are still well in the midst of an ongoing bull market. The benchmark S&P 500 wrapped up 2024 with a gain of 23%, its second-consecutive annual advance of more than 20%.
Equities are taking a breather on Tuesday after beginning the week higher a day earlier. KBW isn't alone in its optimistic outlook on banking stocks in the new year. The cohort rallied after the election of Donald Trump in November, with investors viewing the sector as one of the largest beneficiaries of potentially looser regulations. Here's a closer look at some of the names that made KBW's list. The companies featured are all rated overweight by the firm. Shares of Citigroup have advanced more than 36% over the past year. Analyst David Konrad says key catalysts for the stock moving forward include a roughly 30% discount on its 2026 price-to-earnings ratio compare to peers, as well as potential changes to rules guiding the capital that banks must have against the credit. 'While the stock has been cheap relative to peers historically, we believe near-term catalysts such as greater capital markets activity and capital management are likely to make the multiple re-rate,' Konrad said. His $85 per share price target implies about 17% upside ahead. C YTD mountain Citigroup stock. Synchrony Financial stock has surged more than 72% over the past year. Analyst Sanjay Sakhrani's $82 per share price target implies about 21% upside moving forward. The analyst similarly listed looser rules and regulations as catalyst for Synchrony stock, and specifically pointed to a previously proposed provision that would cap late credit card fees at $8 first introduced by President Joe Biden