Tower-Bridge Reports- 5 Bank Stocks that will help inflation-proof your portfolio


London, UK – Inflation is defined as an increase in prices and a decrease in money’s buying power. People have been looking for companies that would do well in this inflation-driven market, as increasing interest rates have been a major source of anxiety throughout the world. So, which stocks should you keep an eye on?

Banking stocks may not be the first stocks that spring to mind when it comes to battling inflation but hear me out. The difference between the interest rates on deposits and the interest rates the bank obtains on the loans it makes is one of the ways banks generate money.

Interest rates rise when inflation rises, which boosts banks’ net interest revenue and, as a result, total profitability. Furthermore, banks and their insurance partners offer insurance packages that cover their clients’ entire portfolios, from retail to ultra-high net worth. As a result, investments made with extra cash from underwriting operations will yield more revenue as interest rates rise.

As you may have guessed, a senior analyst at Tower Bridge also suggests that this provides a banking stock investing opportunity. The stock market fell for the first time in two years in the first quarter of 2022, owing to rising inflationary pressures on American consumers. In February 2022, the consumer price index increased 7.9% year over year, the highest increase since 1982. Investors are getting increasingly anxious that inflation may be here to stay, as even Federal Reserve Chairman Jerome Powell recently recognized that “inflation is much too high.” Bank of America has created a pro-inflation stock screen to find stocks having a significant positive link to inflation in the past.

Following are the five bank stock options that are highly recommended to inflation-proof your portfolio this year. It is because they will allow you to counter any loss whether we have another lockdown, recession, or economic slowdown.

1-    Berkshire Hathaway Inc. (NYSE:BRK.B)

Our first financial option is Berkshire Hathaway Inc. (BRK.B), a very profitable, diversified financial corporation that trades like a stock but is akin to an ETF or mutual fund. BRK.B is one of the most well-known firms controlled by industry giant Warren Buffett, and it is frequently in the news. With multi-sector interests that include insurance operations, freight rail transportation, and global utility firms, this company, which is known for being conservative, continues to rise owing to one of its major tech holdings, Apple Inc., which accounts for 5.6 percent of the stock (AAPL). Furthermore, financials such as American Express Company (AXP), Bank of America Corp (BAC), and U.S. Bancorp (USB) are among its top stock holdings, indicating that “I feel quite good about the institutions we own.” The CEO of Berkshire Hathaway, Warren Buffett told CNBC that banks are “extremely attractive compared to most other assets I see,” adding that despite certain concerns, banks are among his largest holdings. Buffett has been cited as saying, “It’s far better to acquire a fantastic business at a fair price than a fair company at a fabulous price,” and he is a big believer in investing in outstanding firms. Despite the fact that previous performance is no guarantee of future outcomes, Buffett’s 50 years of expertise and accomplishment are reason enough to evaluate his stock.

BRK.B is up 15% year-to-date, 30% year-to-date (almost twice the S&P 500), and +112% year-to-date. Despite a C- valuation rating, this company represents a combination of high-quality firms that should be included in a portfolio.

2-    HSBC Holdings plc (NYSE:HSBC)

HSBC Holdings plc (HSBC) is a global financial and banking services firm. It not only offers retail banking but also wealth management products for a diversified portfolio. Where rapidly rising interest rates may slow loan demand, which impacts revenue generation. Institutions like HSBC produce additional income through investment management fees. HSBC has stable Price to Sales ratios, and its current share price of $33.89 is +11% YTD and up nearly 14% over one year. As we look at HSBC’s quant grades, it’s evident why we believe this stock is a strong buy.

3-    UBS Group AG (NYSE:UBS)

UBS, the worldwide wealth management and diversified capital markets organization, offers personal and corporate banking and is my third financial sector option. This stock is now trading at a discount, having recently declared a $0.162/share dividend and posting outstanding Q421 results.

This financial stock has a B- overall valuation rating with a forward P/E ratio of 7.78x, which is roughly 30% lower than the sector. The stock has been on an upward trend, with a gain of 15% in the previous year and a gain of 35% in the last five years.

  • Citigroup Inc. (ticker: C)

Citigroup’s stock lagged its bank rivals in 2021, but Firm of America analyst Ebrahim Poonawala believes the bank’s initiatives to reorganise and streamline the bank’s worldwide operations, including an exit strategy for Mexico, are on the right track. Citigroup shares are currently trading at a discount to tangible book value. C stock, which ended at $63.22 on April 23, has a “buy” rating and a $100 price objective from Bank of America.

  • Bank of America Corp. (BAC)

Bank of America’s stock rose about 47% in 2021, but that trend hasn’t carried over into 2022. Given its high net interest income to total net revenue ratio compared to rivals, CFRA Research analyst Kenneth Leon believes Bank of America is particularly well positioned for the rising interest rate cycle. Loan volume and loan balances in the bank’s consumer and commercial/industrial businesses are expected to climb into 2022, according to Leon. As the interest margin widens, he predicts a 5% increase in revenue in 2022 and a 7% increase in 2023. BAC stock, which ended at $44.78 on April 23, has a “buy” rating and a $53 price target from CFRA.

Conclusion:

BRK.B, BAC, HSBC, ticker: C, and UBS are good buys at their present levels for any investor looking for more exposure to the banking industry and a potential inflationary hedge, thanks to their dominant market share and positions. The five stock recommendations have strong value, growth, and profitability ratings, and they provide product diversity to protect against income decreases induced by Fed tightening while also providing other income sources.

Disclaimer: Our content is intended to be used for informational purposes only. It is very important to do your own research before making any investment based on your own personal circumstances. You should take independent financial advice from a professional in connection with, or independently research and verify, any information that you find in this article and wish to rely upon, whether for the purpose of making an investment decision or otherwise.

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