2 banking growth stocks to buy
The banking industry is often viewed as a cyclical industry, which works best when interest rates rise and worse when they fall. Banks also tend to struggle during recessions because they are strongly tied to the economy. That said, banks can also be incredibly profitable, which is why industry growth stocks can really fly. Here are two bank stocks that should continue to outperform the industry.
1. SVB Financial
If you are following the banking industry, this one should come as no surprise to you. SVB Financial (NASDAQ: SIVB), the parent company of Silicon Valley Bank, with $ 124 billion in assets, has been an absolute beast after the great recession of 2008. The bank caters to the startup, venture capital and capital communities. investment with unique loan products. and a growing investment bank that capitalizes on initial public offerings in the health and life sciences sectors.
The bank saw its share price rise from around $ 45 in January 2010 to over $ 251 at the end of 2019, an appreciation of 546%. The pandemic has only accelerated the popularity of Silicon Valley Bank stock, which is now trading at around $ 580 per share.
One of the reasons Silicon Valley Bank was able to weather this latest recession is its niche lending to venture capital and private equity firms. Hungry for yield and worried about public markets and real estate in 2020, investors turned to private markets. This has led to a lot of investment from VC and private equity firms in start-ups, which is good for the business in Silicon Valley. The pandemic has also accelerated digital trends, and more start-ups tend to appear during and after recessions as more people become entrepreneurs.
In addition, the bank has done a very good job of weathering past recessions and keeps a lot of cash on hand. The recent acquisition by Silicon Valley of Boston Private Financial Holdings, as long as it passes, should help accelerate the bank’s growth in wealth management and private banking, while strengthening its position in Boston, another large ecosystem of start-ups and venture capital.
2. Signature bank
$ 85 billion in assets Signature bank (NASDAQ: SBNY), based in New York, is another bank that did not slow down during the pandemic, but instead saw its growth and share prices accelerate. As of 2020, the bank’s shares were trading at around $ 135 per share. Now it is trading around $ 256. The bank has experienced the same favorable winds as the Silicon Valley Bank. In 2018, Signature launched its fund banking division to also cater to the private equity and venture capital communities. This segment of loans has grown as most players in the banking industry have struggled to find significant loan growth outside of Paycheck Protection Program loans.
Additionally, in 2019, Signature also unveiled its Signet payment platform, a real-time digital payment platform that uses blockchain technology to clear and settle payments 24 hours a day, 7 days a week, 365 days a year.
With Signet, two business customers in the network can transfer funds to each other anytime and at any time for free, although customers are encouraged to maintain balances of $ 250,000 or more in their accounts. This system is especially useful for cryptocurrency traders, who trade around the clock. It also brings a lot of sticky and unpaid deposits, which helps to increase profit margins. And Signet is still relatively new and quite untapped. Signature’s fund bank and Signet platform are expected to enable the bank to grow faster than the industry as a whole.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.