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Four reasons why Truist Financial is such a super bet among regional banks


Truist Financial (NYSE: TFC) is a super-regional bank, formerly known as Trust Company and Branch Bank (BB&T). The bank changed its name after it merged with Atlanta-based SunTrust Bank in December 2019

April 15, 2021

4 minutes of reading

This story originally appeared on MarketBeat

Truist Financial (NYSE: TFC) is a super-regional bank, formerly known as Trust Company and Branch Bank (BB&T). The bank changed its name after it merged with Atlanta-based SunTrust Bank in December 2019. You may recognize the name Truist because after the completion of the merger, the bank is inherited the naming right to the Atlanta Braves of Major League Baseball.

Although the banking sector is generally considered a low growth sector, regional banks are expected to have more prosperity when they escape the pandemic. And that is saying something because some regions did very well during the pandemic.

TFC shares, for example, have risen 79% in the past 12 months. However, to be fair, many companies will have a low threshold to pass when comparing between 2021 and 2020. A better metric for investors could point to a near 10% increase in shares. votes from pre-pandemic levels.

Some analysts will point out that this is a case of stocks rising too high. Although analysts’ consensus was skewed towards buying, seven out of 15 analysts who gave TFC ratings remained flat.

However, it is a regional bank that may be well-known for a number of reasons beyond the rising yield on 10-year Treasury bonds. Here are four reasons why you should keep Truist on the list of regional banks to watch.

Why is Truist Financial a Buy?

First, many analysts believe that one of the main drivers of banks’ growth this year is the predicted economic recovery. With that in mind, Truist has a large footprint in the middle of the Atlantic and Southeastern US, giving it significant exposure to two of the country’s fastest growing regions.

This leads to the second point. The vaccine rollout across the United States is drawing attention. Despite the recent announcement about the pause Johnson & Johnson (NYSE: JNJ) The Biden administration announced that there is a lot of vaccine supplies for the country.

During the pandemic, regional banks were more vulnerable to loan losses than larger banks. That’s because they have many The income stream is tied to their loan book. In Truist’s case, that number is about 63%. That is why the sooner businesses are able to get back into business as (near) normal, the higher the likelihood that borrowers will be able to make their payments, which will minimize fees. .

Third, while many banks were still looking to join the ongoing wave of consolidation with banks in the region, Truist was there. In theory, that would give the bank an advantage in competing with larger banks.

And finally, like most banks, Truist is expected to publish high earnings. Banks are expected to bring in high incomes, and Truist is no exception. Analysts are targeting an EPS of $ 1.08, a 100% increase from the 54% EPS Truist posted in the previous year. And it will be a 4.8% increase over the same period in 2019. This could be evidence that Truist’s $ 1.6 billion cost-cutting initiative may be starting to succeed.

Truist is also expected to bring in $ 5.47 billion in revenue, about 2% lower on a quarterly and annual basis.

The bottom line about TFC shares

TFC’s stock has a consensus buy rating with a price target that shows some downsides. On the other hand, the recent price targets are significantly higher than the current prices. You can create that what you will do.

However, shares have strong institutional ownership at more than 70% as hedge funds are increasingly interested in stocks. The bank beat expectations on both the upper and lower lines during a pandemic. That is not a small feat.

And even if stocks don’t have exactly the same growth trajectory, the stock still pays a good dividend, now yielding about 3%.

As an engine, TFC stock is a good choice for both growth and value in 2021.

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