Several big banks will kick off earnings season for the sector on Friday, yet it’s the smaller, under-the-radar names that are most loved by Wall Street. Along with the broader market, banks had a tough 2022. The SPDR S & P Bank ETF lost more than 17%, although it was less than the nearly 20% drop suffered by the S & P 500 . The ETF is positive so far this year, up about 3%. KBE YTD mountain SPDR S & P Bank ETF is up so far this year Wells Fargo analyst Mike Mayo believes banks will outperform this year and may even see a spike higher. “There is a chance for a several week ‘melt up’ at some point during 2023 given the number of investors waiting to buy,” he wrote in a note Wednesday. However, recession fears are weighing on many investors and analysts’ minds, since a downturn can expose banks to reduced loan demand, rising loan defaults and write-downs on assets. Those concerns are reflected in Wall Street’s calls on some of the big banks. For instance, only 54% of analysts covering Bank of America say the stock is a buy, while 58% of those covering JPMorgan rate it a buy, according to FactSet. To find bank stocks expected to outperform this year, CNBC Pro screened for the names most loved by analysts. The companies are part of the SPDR S & P Bank ETF, have at least 70% of the analysts covering the stock rating it a buy, and have at least 20% upside to the average price target, according to FactSet. They also have at least 8 analysts covering them. The results included no big banks. The name with the most upside to the average analyst price target is Equitable Holdings , at nearly 28%. Some 71% of analysts covering the stock rate it a buy. Equitable Holdings lost 12.5% in 2022. Wintrust Financial also has nearly 28% upside to the average analyst price target and 83% of analysts covering the stock rating it a buy. The company, which announced in November it was acquiring two asset management businesses from Rothschild, is set to release fourth-quarter earnings next week. “We expect 4Q loan growth to trend towards the higher end of mid to high single digit guidance and moderate growth in deposits,” Wedbush Securities analyst David Chiaverini wrote in a note last week. He has a buy rating on the stock. Wintrust Financial lost 12.5% in 2022. Voya Financial , a retirement, investment and insurance company, has about 20% upside to the average analyst price target. About 80% of the analysts covering the stock give it a buy rating, including Piper Sandler’s John Barnidge. In a note Thursday, he called Voya Financial “a contrarian idea but one that we view as one of the best positioned in our coverage universe for stock trading outperformance in ’23.” Barnidge believes Voya will benefit from the strong U.S. dollar’s impact on benefit and retirement planning demand. In addition, the resumption of buybacks will be a catalyst at the end of the year, its acquisition of Allianz Global Investors’ U.S. funds will begin to demonstrate revenue synergies and its valuation appears attractive, he said. Voya, which lost 7% last year, will report earnings after the bell on Feb. 7.
