- Dodd-Frank Act shackled the nation’s banks.
- Trump aims to break the chains.
- One bank is perfectly positioned to reap the rewards.
In the financial markets, tech and energy stocks have gotten the lion’s share of press recently.
As you may know, tech stocks have rallied on surging second-quarter profits, and energy names have tanked on plunging oil prices.
But thanks to a major piece of legislation passed last week — led by Trump — one sector of the stock market has staged a major comeback.
And as senior analyst Jonathan Rodriguez writes below, there’s a lot more upside ahead for these stocks…
Ahead of the tape,
The Real Driver of Economic Growth
Banks have gotten a bad rap in the wake of the financial crisis of 2008.
Yes, it’s true that some of the country’s largest institutions were guilty of overleveraging themselves and engaging in nefarious trading activities.
And the trouble ultimately led to a $250 billion taxpayer-funded bailout of the industry.
But the misdeeds of a relative few have weighed on many of America’s banks.
As you know, Congress passed the Dodd-Frank Act, which detailed sweeping financial regulations intended to prevent another meltdown, into law in 2010.
Some of these regulations include increased reserve capital requirements, the creation of the Consumer Financial Protection Bureau (a $600 million financial watchdog for consumers) and a mountain of red tape that now stands between lenders and customers.
And while many of these cost-heavy regulations target the nation’s largest banks, some of which have been deemed “too big to fail,” they broadly affect banks of all sizes — unfairly so.
In fact, Federal Reserve Chair Janet Yellen confessed in February that community banks — small banks that serve regional customers — were not responsible for the financial crisis.
Yet community banks across the country are saddled with the sky-high costs of compliance for crimes they did not commit.
We’re talking about millions of dollars they could be lending to their residential and business customers to drive the economy.
Well, if the Trump administration has its way… our nation’s most crucial lenders are about to be unshackled.
Last week, the House passed the Financial Choice Act. Among other things, it exempts small banks (those with less than $50 billion in assets) from key CFPB regulations on loan-making.
Of course, the bill will likely undergo debate and change in the Senate.
But this is the first step toward unlocking a huge growth opportunity for investors.
And if you’re looking for a head start, here’s a tiny bank well-positioned to capitalize on deregulation…
A Rising Star Down South
Investar Holding Corp. (NASDAQ: ISTR) is the holding company for Investar Bank, a community bank headquartered in Baton Rouge, Louisiana.
Investar sports a growth-friendly market cap of $204 million and is one of most well-capitalized community banks in the country.
Over the last five years, annual loan growth for the bank has surged by double digits. Since 2012, revenue has grown 31% — seven times the growth of the industry (5%) over the same period.
The bank has also boosted net income by an average of 35% over the last three years. That’s four times the industry average.
And Investar’s booming business isn’t expected too cool any time soon…
On double-digit loan and deposit growth, Wall Street estimates the bank will post earnings of $1.60 next year — a 44% annual increase.
Better still, analysts see a 23% increase in revenue in 2018 — more than twice the industry’s projected top-line growth.
The company trades at 16 times forward earnings — right in line with the industry but 20% below the S&P 500.
Investar also boasts a price-to-book of 1.3 — a 13% discount to the industry average (1.5).
And the company sports a yield of 0.35%.
Best of all, even if Trump’s Dodd-Frank reforms stall in Congress, the bank is on solid financial footing and poised for growth over the next several years.
On the hunt,