Regional Bank Stocks to Watch: Trump's Return Could Spark a Boom
As the 2024 U.S. presidential election results roll in, the buzz around Donald Trump's return to the White House has already started to ripple through the markets. While the fight for control of the House remains tight, the GOP's triumph in securing a majority in the Senate has already set the stage for potential changes in policy that could favor regional banks. Investors are cautiously optimistic that the likely reduction in regulatory pressure could benefit this sector, especially in terms of reduced capital requirements and increased opportunities for mergers and acquisitions.
In fact, as of November 6th, the SPDR S&P Regional Banking ETF (KRE) surged by over 13%, reflecting a market that's betting on a friendlier environment for regional banks under a Republican-controlled Congress. But while investors are closely watching the political landscape, there's another key factor to consider: high-yield dividend stocks within this space that are catching Wall Street's eye.
Here's a closer look at some regional bank stocks with enticing dividend yields, strong buy ratings, and upside potential—stocks that could benefit not only from favorable political winds but also from solid financial fundamentals. (All data is based on the November 5th closing price.)
1. Western Alliance Bancorporation (WAL)
Dividend Yield: 1.8%
2024 YTD Performance: +44%
Western Alliance Bancorporation is an interesting pick with a solid track record and impressive growth prospects. Despite reporting a slight miss on earnings in Q3 (EPS of $1.80 versus the market's expectation of $1.89), its net interest income (NII) beat expectations at $696.9 million. Analysts remain bullish on the stock, with 93% of ratings being either "buy" or "hold." In fact, D.A. Davidson analyst Gary Tenner sees positive momentum for the bank's balance sheet, despite some headwinds in the near term.
"Although Q3 results were below expectations, we expect the bank's lower-cost funding and positive asset growth to push NII higher going into Q4," said Tenner. Given the stock's strong performance in 2024, it's clear that investors are betting on Western Alliance's continued upward trajectory.
2. Popular, Inc. (BPOP)
Dividend Yield: 2.8%
2024 YTD Performance: +20%
Popular, Inc. is another solid contender in the regional banking sector. With a dividend yield above the S&P 500's average of 1.3%, it offers attractive income potential to investors. The bank did fall short of earnings expectations in Q3, reporting EPS of $2.16 (below consensus of $2.30) and NII of $572.5 million (below the expected $585.1 million). However, analysts like Piper Sandler's Frank Schiraldi remain optimistic, maintaining a "buy" rating despite lowering 2025 EPS estimates slightly.
"The bank's strong loan growth is a positive indicator for the future," Schiraldi commented, noting that the company's loan book is expanding at nearly double the expected rate. Investors seem to be taking the longer view on Popular, with the stock rising over 20% this year alone.
3. Provident Financial Services, Inc. (PFS)
Dividend Yield: 5%
2024 YTD Performance: +21%
Provident Financial Services is another high-dividend stock in the regional bank space that stands out, especially for its generous 5% yield. Though it posted a miss on earnings with Q3 EPS coming in at $0.36 (below the expected $0.47), and its NII was also shy of expectations at $183.7 million (versus $187.5 million), analysts remain optimistic about Provident's future. Piper Sandler's Mark Fitzgibbon has reiterated his "buy" rating despite revising down his 2025 EPS estimate slightly.
Fitzgibbon remains confident that the bank's smaller scale allows it to stay nimble while competing with larger institutions. "Provident's ability to adapt and improve its profitability in a challenging environment is key," he explained. With strong dividend yields and solid upside potential, Provident's stock could continue to be a top pick for income investors.
Why Regional Banks Matter Right Now
The expectation of lighter regulatory pressures under a Republican-controlled Congress is a key factor driving optimism about regional banks. Piper Sandler's R. Scott Siefers pointed out that the potential rollback of punitive measures—such as stricter capital requirements and transaction fees—could significantly improve the profitability and outlook for regional banks.
Beyond the political landscape, the financial fundamentals of banks like Western Alliance, Popular, and Provident also provide a solid foundation for growth. Investors are betting that these institutions will continue to show resilience, even in the face of economic uncertainty.
What Are Your Thoughts?
With Trump's return to office potentially signaling a more favorable regulatory environment for regional banks, it's worth thinking about how this could affect your portfolio. Do you believe the regional bank sector will continue to thrive under a Republican-led Congress, or are there other sectors you're keeping an eye on?
Let me know your thoughts in the comments below—let's keep the conversation going!