Janney Montgomery Scott's and Jefferies' bank research teams released their top picks in the bank sector for 2020.
Janney analysts named Columbus, Ga.-based Synovus Financial Corp. a top pick, writing that the company is a "clear winner" in the possible customer and talent attrition from the merger of equals between BB&T and SunTrust, now Truist Financial Corp. D.A. Davidson and Baird analysts also named Synovus a top pick.
Jefferies analysts wrote that there was greater risk for negative catalysts than positive ones in the year ahead, pointing to the presidential election, potential credit deterioration and political headwinds. Given that setup, the analysts wrote that their "favorites are few," identifying F.N.B. Corp., Signature Bank and Sterling Bancorp as their top picks among midsize banks. The analysts had more top picks in the large-bank space: Citigroup Inc., Truist Financial Corp., Regions Financial Corp., Fifth Third Bancorp and KeyCorp.
For Janney's analysts, Nashville, Tenn.-based Pinnacle Financial Partners Inc. — which recently announced a move into Atlanta with a de novo startup — was also a top pick. Pinnacle's move into Atlanta is a "significant positive" due to recent consolidation making the area "extremely vulnerable," the analysts wrote. Pinnacle plans to capitalize on market disruption in the Southeast.
Other top picks include Chicago-based First Midwest Bancorp Inc. and Billings, Mont.-based First Interstate BancSystem Inc. Two of the analysts' top picks were in New Jersey: Short Hills-based Investors Bancorp Inc. and Toms River-based OceanFirst Financial Corp.
The Janney analysts wrote that they have "high conviction" for all six companies' EPS outlook, tangible book value growth and returns in 2020. All six banks have a rising franchise value due to both deposits and tangible book value expanding, according to the analysts.