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

3 Bank Stocks to Bet on

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.

Price and Consensus: CADE

Image Source: Zacks Investment Research

FB Financial, headquartered in Nashville, TN, operates through full-service bank branches across Tennessee, Kentucky, Alabama and North Georgia, and mortgage offices across the Southeast. Relatively high interest rates, decent loan demand and efforts to bolster non-interest income will keep supporting the company’s financials.

Over the years, FBK, which has a market cap of $2.6 billion, has grown substantially, expanding organically. Also, solid liquidity position and capital levels aid the company. Though its total revenues are projected to decline 3.8% this year, the trend will reverse post that. In 2025, total revenues are expected to increase 14.3%.

FB Financial’s shares have rallied 14.7% in November. The company sports a Zacks Rank #1, at present.

Price and Consensus: FBK

Image Source: Zacks Investment Research

Birmingham, AL-based ServisFirst Bancshares provides a range of business and personal financial services across Alabama, Florida, Georgia, North and South Carolina, Tennessee and Virginia. The company also operates loan production offices in Florida and Tennessee.

Solid loan balance, improving market share and relatively high rates will support the company’s financials. Further, a strong balance sheet and capital levels will help SFBS amid a challenging operating environment. The company’s revenues are anticipated to grow 7.8% and 17.8% in 2024 and 2025, respectively.

ServisFirst Bancshares has a market cap of $5.3 billion. The company’s shares have soared 15.2% in November. At present, SFBS sports a Zacks Rank of 1.

Price and Consensus: SFBS

Image Source: Zacks Investment Research

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

ServisFirst Bancshares, Inc. (SFBS) : Free Stock Analysis Report

FB Financial Corporation (FBK) : Free Stock Analysis Report

Cadence Bank (CADE) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research