Finance stocks, in general, and bank stocks, in particular, are not the most exciting investments. But in the last two years, they’ve been mostly dreadful. In 2023, higher interest rates caused several small banks to collapse. For much of 2024, a cloud of regulation, known as Basil III Endgame, hung over the industry and weighed down many stocks that were already struggling with a tough lending environment.
But there are signs that 2025 will be a better year for banks. While that bodes well for a blue-chip name like JPMorgan Chase & Co. (NYSE: JPM), value-seeking investors may be better off looking to the regional banks for stocks that may outperform the broader market. These banks would have a difficult time efficiently meeting the capital requirements and liquidity standards brought on by Basil III. That's why a more relaxed standard may make regional banks more attractive.
But as is the case when investing in any sector, fundamentals matter. Here are three regional bank stocks that have started to rally in 2024 and look particularly attractive heading into 2025.
KeyCorp Is Likely to Move Higher as a Merger Target
KeyCorp (NYSE: KEY) stock has been up sharply in the last six months, which has erased a loss and has shares up 25.9% in 2024 as of December 13. The company recently announced regulatory approval for the Bank of Nova Scotia (NYSE: BNS) - also known as Scotiabank - to make an additional investment of approximately 10% in KeyCorp. This comes on the heels of an initial 4.9% investment made by Scotiabank in August.
Does this make KeyCorp a merger target? It’s unclear at this point. But it’s certainly possible. And it could be a reason that analysts remain bullish on KEY stock, which otherwise looks fairly valued. The KeyCorp analyst forecasts on MarketBeat give the stock a consensus price target of $19.16 which is a 5.6% increase.
However, investors aren’t necessarily buying KEY stock for capital growth. Instead, they’re eyeing the company’s high-yield dividend which has a current yield of 4.53%.
Analysts Are Pegging Regions Financial as a Big Winner of Lighter Regulation
At one point in early December, Regions Financial Corp. (NYSE: RF) stock was up more than 50%, making it one of the sector’s strongest performers. Analysts like the bank’s balanced and diversified portfolio as well as its strong footprint which covers much of the Southern United States.
The stock has pulled back about 5% in the week of December 13 but is still up more than 28% for the year. That’s put the stock around $24 per share, making RF stock look more attractive.
In its third-quarter earnings report delivered in October, the bank said that it was well capitalized for Basil III Endgame requirements. And with expectations that those regulations may be looser, analysts are raising their price targets. The consensus price target for RF stock as of December 13 is $27.61, which is over 10% higher than its closing price.
Huntington Bancshares Has Room to Move Higher
Huntington Bancshares Inc. (NASDAQ: HBAN) is one of the best-performing regional bank stocks in 2024, up 34.3% as of December 13, 2024. In a familiar theme, most of that growth has come in the last six months of the year as optimism for a looser regulatory environment prevailed.
However, after a pullback of approximately 2.5% in the last month, HBAN stock still trades for $17.12 per share and looks fairly valued based on projected earnings. That hasn’t stopped analysts from raising their price targets. One of the most bullish outlooks comes from analysts at JPMorgan Chase, who reiterated their Overweight rating on the stock. The firm believes the bank’s earnings will grow 6% above estimates in 2025.
Two areas that stand out are the bank’s deposit mix, which has recently focused on commercial deposits, and its strategic focus on money market growth over certificates of deposit (CDs).