Dj Comerica Inc. Stock Outperforms Competitors On Strong Trading Day

Financial stocks are basking in a post-election rally after Donald Trump's election win as investors anticipate a friendlier regulatory landscape for banks, brokers and consumer finance companies.

With expectations of deregulation and possible tax cuts, traders are piling into financials at levels not seen in years.

The Financials Select Sector SPDR Fund jumped over 5% last week, hitting fresh record highs, while weekly inflows surged to $1.573 billion—the highest in over two years.

Regional banks, in particular, were on fire, with the SPDR S&P Regional Banking ETF skyrocketing nearly 11% and seeing $1.09 billion in inflows, marking its largest influx of money since March 2023.

Key Drivers: Deregulation, Tax Cuts Fuel Investor Optimism

Investors are betting on a wave of Trump-favored financial reforms that could benefit the sector.

Richard Ramsden, a Goldman Sachs analyst, highlighted that "the market is pricing in the potential for changes to a number of proposed regulations, a step up in capital markets activity, as well as the potential for a reduction in the corporate tax rate."

Potential regulatory changes under Trump could include:

• 401K Reform: Opening up retirement plans to private investments could attract a flood of new capital.
• Relaxed Antitrust Regulations: A more lenient antitrust stance may spark increased mergers and acquisitions (M&A) activity.
• Reduced SEC Oversight: There is limited clarity on whether the SEC will continue probing brokers' sweep pricing practices.
• Crypto-Friendly Policies: Financial firms with crypto exposure may benefit from a more favorable regulatory environment and higher digital asset prices.

Goldman Sachs's Top Picks Among Financials Stocks

In anticipation of these shifts, Ramsden and his team have identified several top picks across the financial sector.

Here's where they see the biggest potential gains:

• Large Banks: Citigroup Inc. , JPMorgan Chase & Co. , and Wells Fargo & Co. .
• Consumer Finance: Bread Financial Holdings , Synchrony Financial , and Capital One Financial Corp. .
• Capital Markets: Blackstone Inc. , Apollo Global Management Inc. , KKR & Co. Inc. , LPL Financial Holdings , Tradeweb Markets Inc. , Evercore Inc. , and PJT Partners Inc. .

Steeper Yield Curve Expected to Boost Regional Banks

As markets react to potential economic stimulus and reduced regulatory pressure, analysts anticipate a steeper yield curve, which could be a windfall for banks with heavy exposure to fixed-rate assets.

Around 60% of both regional and large banks' balance sheets consist of fixed-rate holdings, positioning them to profit as long-term rates rise.

Ramsden's picks for banks that stand to gain the most from a steeper yield curve include:

Regional Banks:

• Citizens Financial Group Inc.
• Comerica Inc.
• First Hawaiian Inc.
• Zions Bancorporation
• Truist Financial Corp.
• Huntington Bancshares Inc.
• Regions Financial Corp.
• PNC Financial Services Group Inc.
• Ally Financial Inc. .

Surge in Capital Velocity: M&A and Trading Boost Expected

Trump's pro-business stance is also expected to accelerate capital velocity in the M&A and equity capital markets, providing a strong backdrop for trading activity.

According to Ramsden, large banks like Morgan Stanley could be the biggest beneficiaries, while among regional banks, KeyCorp and Citizens Financial Group Inc. stand out.

Investment banks could also see a boost, with Jefferies Financial Group Inc. , Moelis & Co. , PJT Partners Inc. , and Piper Sandler Companies positioned to capitalize on a more active M&A market.

In the alternative asset management space, Carlyle Group Inc. , KKR, Apollo, TPG Inc. , and Ares Management Corp. are expected to benefit from an uptick in private equity deal flow.

Tax Cut Hopes Could Supercharge Regional Banks

Financial stocks are uniquely positioned to benefit from any corporate tax reductions, given that 90% of their earnings come from the U.S. and are currently taxed at an average rate of 23%. After the 2017 tax reform slashed the corporate tax rate from 35% to 21%, financials saw their effective tax rate drop by 10 percentage points.

Ramsden estimates that if the Trump administration pursues another tax cut, regional banks would likely see the most significant upside.

His top tax-cut beneficiaries include Moelis & Co. , American Express Co. , Evercore Inc., Bread Financial Holdings, Piper Sandler, First Citizens BancShares Inc. , Synovus Financial Corp. , and Western Alliance Bancorporation .

Insurers to Benefit from Steeper Curve, P&C Pricing Power

The insurance sector may also stand to gain under Trump's pro-business policies. Ramsden expects potential increases in claim costs but sees positive momentum for property and casualty pricing.

Insurers with substantial U.S. exposure and a favorable position on the yield curve could see tailwinds.

Ramsden's picks in the insurance space include W.R. Berkley Corp. , Hartford Financial Services Group Inc. , and The Travelers Companies Inc. , which he believes are better positioned than brokers to benefit from these trends.

Read Next:

• EXCLUSIVE: Trump Victory Triggers ‘Reshoring’ Rally As Supply Chain Security Outweighs Cost

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© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

Trinity Capital Inc. TRIN shares rose 1.8% in after-hours trading following the announcement of a new share repurchase program on Thursday.

TRIN’s board of directors authorized a share buyback plan worth $30 million. The program is set to expire earlier of either Nov. 7, 2025, or full utilization of the authorization.

The company noted that it can “take advantage of situations where the Company's management believes share repurchases would be advantageous to the Company and to its shareholders.”

Earlier, in November 2022, Trinity Capital announced a share buyback authorization worth $25 million, which expired on Nov. 11, 2023. Under this, the company repurchased 0.9 million shares at a weighted average price of $10.91.

TRIN’s Dividend Distribution History

Other than the newly announced buyback program, TRIN regularly pays dividends.

Trinity Capital is a business development company and to maintain its regulated investment company status, it is required to distribute 90-100% of its taxable income to the shareholders.

At present, TRIN pays 51 cents per share as a quarterly dividend. It hiked the dividend by 2% in March 2024. Over the last five years, the company increased its quarterly dividend 10 times, with annualized dividend growth of 18.69%.

Based on Thursday's closing price of $13.63, TRIN has a dividend yield of 14.97%. This is impressive compared with the industry’s 10.12%. The yield is attractive for income investors and represents a steady income stream.

Trinity Capital Inc. Dividend Yield (TTM)

Trinity Capital Inc. dividend-yield-ttm | Trinity Capital Inc. Quote

Sustainability of Trinity Capital’s Capital Distributions

As of Sept. 30, 2024, Trinity Capital had $228.5 million in liquidity, including $8.5 million in unrestricted cash and cash equivalents.

For the nine months ended Sept. 30, 2024, the company reported total investment income of $166.9 million, which improved 24.5% year over year. On the other hand, net investment income per share of $1.54 declined 7.2% because of a jump in interest expense and other debt financing costs.

Nonetheless, given a robust liquidity position and decent earnings strength, the company is expected to continue with efficient capital distribution activities.

Shares of this Zacks Rank #3 (Hold) company have lost 5.5% in the past three months against the industry’s growth of 4.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Similar Steps by Other Finance Firms

Comerica Incorporated’s CMA board has approved an additional share repurchase authorization of up to 10 million shares of its outstanding common stock, with no expiration date. This new authorization is in addition to the 5 million shares available as of Sept. 30, 2024, under the prior share repurchase program.

In the fourth quarter of 2024, CMA plans to repurchase approximately $100 million shares.

SEI Investments Company SEIC approved a $400 million increase in its stock repurchase program in October 2024, bringing the total available authorization to approximately $429 million.

This includes the $29 million remaining under SEIC’s existing share repurchase authorization.

Zacks Investment Research

State Street Corp STT remains well-positioned for growth on the back of higher interest rates, efforts to improve fee income and strategic acquisitions. However, a rising expense base and concentrated fee-based revenues remain concerns. Nonetheless, solid capital distributions are another positive.

State Street’s Growth Drivers

Higher Rates to Aid Net Interest Revenue: State Street’s net interest income (NII) and net interest margin (NIM) are anticipated to witness a modest expansion amid the relatively high-interest rate scenario. Both reflected a solid improvement in 2022 and 2023, driven by higher rates. NII experienced a compound annual growth rate (CAGR) of 7.8% over the three years ended 2023.

Similarly, NIM expanded to 1.20% in 2023 from 1.03% in 2022. High funding costs and lower non-interest-bearing deposit balances exerted pressure on NII and NIM during the first nine months of 2024.

As the Federal Reserve signaled future rate cuts, funding costs are anticipated to stabilize eventually. Also, the company’s investment portfolio repositioning initiative will aid NII and NIM growth. Our estimate for NII indicates a CAGR of 2.8% over the next three years.

Efforts to Bolster Fee Income: STT remains focused on improving fee income sources. Though the company’s total fee revenues dipped in 2022 and 2023, the metric reflected a four-year (2019-2023) CAGR of 1%. This growth was primarily driven by increased client activity and substantial market volatility. The uptrend continued during the first nine months of 2024. Moreover, servicing assets yet to be installed were $3.5 trillion in 2021, $3.6 trillion in 2022 and $2.3 trillion in 2023 across client segments and regions.

Notably, the company had $2.4 trillion of servicing assets to be installed at the end of the third quarter of 2024. State Street remains well-positioned fundamentally on account of its global exposure and a wide array of innovative products and services (including the launch of State Street Digital and State Street Alpha). These efforts, combined with business servicing wins and inorganic growth measures, are anticipated to bolster fee revenues. We project total fee revenues to rise 5.3% this year.

Strategic Buyouts: State Street has been expanding its scale via strategic acquisitions and restructuring efforts. This September, the company collaborated with Apollo to boost investors' accessibility to private markets, while in August, it announced its plan to acquire a 5% stake in Australia-based Raiz Invest Limited and a strategic partnership with Taurus.

Further, in February, the company acquired CF Global Trading to expand its outsourced trading capabilities. Further, as part of the consolidation of its India-based operations, the company has assumed full ownership of its two joint ventures. These are part of STT’s ongoing initiatives to optimize its global operations. Such opportunistic buyouts are expected to lead to revenue and cost synergies alongside expanding the company’s footprint globally.

Encouraging Capital Distributions: STT has hiked its quarterly dividend by 10% to 76 cents per share following the clearance of its 2024 stress test. Moreover, this January, the company authorized the buyback of shares worth up to $5 billion, with no expiration date.

As of Sept. 30, 2024, roughly $4.3 million worth of shares remained available for repurchase under authorization. The company intends to distribute 80-90% of its earnings to shareholders this year. Given a solid capital position and earnings strength, the company will likely keep its capital distributions sustainable going forward.

Nonetheless, rising operating expenses and concentrated fee-based revenues alongside volatile capital markets are near-term concerns.

Zacks Rank & Price Performance for STT

Year to date, shares of STT have gained 25% compared with the industry’s rise of 21.7%. STT currently sports a Zacks Rank #1 (Strong Buy).

Other Banks Worth a Look

A couple of other top-ranked bank stocks are Northern Trust Corporation NTRS and Comerica Incorporated CMA.

The Zacks Consensus Estimate for NTRS has been revised upward marginally for 2024 over the past week. The stock price has increased 24.5% over the past six months. NTRS currently sports a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here.

Earnings estimates for CMA have been revised marginally upward for the current year over the past week. In the past six months, CMA’s shares have risen 30.5%. Presently, CMA carries a Zacks Rank #2 (Buy).

Zacks Investment Research