The start of what may be a stream of rising interest rates as the Federal Reserve fights high inflation has stock investors jittery, and rightly so.
Peters pointed to increasing loan demand, improving profitability as interest-rate spreads widen and a decline in bank stock valuations so far this year. At the end of business on March 23, the yield on 10-year U.S. Treasury notes TMUBMUSD10Y, 2.354% was 2.32%, which was the same as the yield on three-year notes TMUBMUSD03Y, 2.375%, according to the Treasury Department’s daily yield curve. The curve was indeed inverted with yields of 2.34% on five-year notes TMUBMUSD05Y, 2.392% and 2.37% on seven-year notes TMUBMUSD07Y, 2.412%.In a world that continues to be awash with cash, banks don’t need to pay much for deposits.
Two favored bank stocks Now let’s review data for the two banks Peters discussed — Wells Fargo & Co. WFC, +0.41% and Signature Bank of New York SBNY, +1.85%. To simplify, in the following table forward price-to-earnings ratios are based on consensus EPS estimates for 2022:Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.
All five banks are expected to have their earnings per share increase at double-digit compound annual growth rates over the next two years. But those projections are much higher for Wells Fargo and Signature Bank.