That more investors are convinced the Fed will pivot next year to lower interest rates may be the reason for the buying coming into bank stocks. The expectation that such a favorable factor is likely in the offing might be enough for institutions and hedge funds to return to these big banks.

Another factor may be the Credit Suisse situation where scandals have resulted in major losses. The stock of the financial firm has dropped from 14 to 4 over the past 2 years. It’s a decent guess that investors seeking bank exposure have moved funds to well-known names with fewer problems.

These are boring stocks of the mature variety and are interesting right now because of the price chart patterns that have been forming. The basics of the fundamentals are about the same for each: a low price-earnings ratio, a decent dividend payment and a huge market cap. These probably won’t be found on “growth stock” lists.

The Bank of New York Mellon

(NYSE: BK) has a market capitalization of $36.35 billion which places it in the “large” category of equities traded on the New York Stock Exchange. The company is trading with a price-earnings ratio of 11 and at 1.06 times book value. A dividend of 3.24% is being paid.

Note how the stock has crossed above the declining 200-day moving average (the red line) for several consecutive sessions. It looks as if the 50-day moving average (the blue line) is about to turn upward for the first time in a long time. The Bank of New York Mellon relative strength indicator (RSI, below the price chart) is showing a positive divergence.


The M&T Bank

(NYSE: MTB), headquartered in Buffalo, New York, has a market capitalization of $29.24 billion making it another in the “large” category. Institutions own 86% of the total float. The stock trades at just above its book value with a price-earnings ratio of 17 and a forward p/e of 8.9. Investors receive a dividend of 2.79%.

Buyers showed up in mid-November and bought enough of the stock that it’s broken above the former resistance level of 170. In the upper left hand corner of the chart, it says, in green, “P&F Pattern Triple Top Breakout on 22-Nov-2022.” M&T Bank has a ways to go before the downtrend is reversed but this recent action suggests that buyers are willing.

UBS Group AG (NYSE: UBS) is huge: the market capitalization is $64.77 billion, greater than, for example, the General Motors
market cap of $55.85 billion. With a price earnings ratio of 8.77, the stock trades at 1.07 times its book value. Earnings this year are up by 16.20% and the past 5-years earnings growth is 18.60%. Long-term debt exceeds shareholder equity by 2 times. UBS pays a dividend of 2.69%.

On this weekly price chart, it’s clear that buyers are returning in good numbers: look at how the stock is strongly back above the 50-week moving average. UBS has broken the downtrend that had been in effect from early 2022. The 200-week moving average is trending upward in an unmistakable fashion.

Even with these improved-looking charts, there are wider forces that may disrupt the expectations game. Keeping an eye on consumer price index and the Fed’s reactions will still be important. Models forecasting a “pivot” (or anything else) are never perfectly reliable.

Some fear has left this part of the financial sector. Will it return?

Not investment advice. For educational purposes only.


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