Swayta Shah
4 min read
In This Article:
The markets posted solid gains to turn November into the best-performing month of 2024. All three major indexes – S&P 500, Nasdaq and Dow Jones – witnessed substantial monthly upswings. Donald Trump’s win in the presidential election was the primary factor driving investor optimism. Strong economic growth and the Federal Reserve’s path for a rate cut in December also supported the bullish stance.
Last month, all the sectors within the S&P 500 Index moved up. Among the top three best-performing sectors is the Financial Services, which rallied more than 10%. The major constituent of the Financial Services sector, banks, are highly sensitive to interest rates and a clear winner from Trump’s win.
Hence, we have selected three banks – Cadence Bank CADE, FB Financial Corporation FBK and ServisFirst Bancshares, Inc. SFBS – which performed impressively in November. These stocks outperformed the S&P 500 Index, which recorded a monthly gain of 5.6%
Price Performance in November
Image Source: Zacks Investment Research
Despite the solid performance in November, banks are not completely out of the woods.
The relatively high interest rates are expected to exert pressure on banks’ net interest income (NII) in the next couple of quarters. Nonetheless, as the Fed lowers rates (though at a slower pace than previously expected), NII is likely to improve as funding costs gradually come down. Also, a decent rise in loan demand will drive NII going forward.
Further, potential deregulations will support banks’ financials, freeing up capital.
The three selected banks are fundamentally strong and are expected to gain from lower interest rates, potential deregulation, lower tax rates and the incoming President’s “America First” policy (with no exposure to international markets). The stocks have a market cap of $2.5 billion or more and currently carry a Zacks Rank of 1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Cadence Bank, based in Tupelo, MS, offers commercial and retail banking products and services through approximately 350 offices in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Missouri, Tennessee and Texas.
Since the merger of legacy BancorpSouth Bank and legacy Cadence Bank in October 2021, the company has grown impressively and recently announced changes to its organizational structure, leading to simplified business operations. Support from lower rates, a rise in loan demand and efforts to strengthen fee income will keep driving CADE’s top line. The company’s revenues are expected to jump 31.1% this year and 4.8% in 2025.
Cadence Bank, with a Zacks Rank #2, has a market cap of $7 billion. The company’s shares have gained 14.2% in November.
