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Forget Bank of America, Buy These 3 Financial Stocks Instead

Stock MarketsJul 27, 2021 02:30PM ET
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© Reuters. Forget Bank of America, Buy These 3 Financial Stocks Instead

Shares of Bank of America (BAC) look overvalued at their current price level considering the bank’s bleak growth prospects amid the low-interest-rate environment in the United States. So, we think it is better to bet on shares of renowned foreign financial institutions Banco Santander (MC:SAN), Barclays (LON:BARC) (BCS), and Deutsche Bank (DE:DBKGn) (DB) because they are well-positioned to capitalize on the industry’s recovery around the globe. Read on.One of the world’s leading financial institutions, Bank of America Corporation (NYSE:BAC), declared a $0.21 quarterly dividend per share, representing a 17% increase from the prior quarter, payable on September 24. The company also launched the Bank of America Unlimited Cash Rewards credit card on July 19, allowing clients to earn unlimited 1.5% cash back on all purchases.

However, BAC stock has declined 3.3% over the past three months and 8.4% over the past month to close yesterday’s trading session at $38.13. With BAC viewed as the most exposed to rates among large U.S. banks, the company continues to be impacted by the low-interest-rate environment. In addition, its Merrill Lynch unit needs to pay nearly $11.7 million to resolve claims that it overcharged customers who invested in unit investment trusts. Consequently, the stock looks overvalued at its current price level. In terms of forward P/S and P/B, its respective 3.69x and 1.26x are higher than the 3.17x and 1.14x industry averages. So, we think it’s wise to wait for a better entry point in the stock.

However, according to Globe Newswire, the global financial services market is expected to grow at a 9.9% CAGR of 9.9% to hit $22.5 trillion this year. So, it could be wise to bet on quality foreign financial companies Banco Santander, S.A. (SAN), Barclays PLC (BCS), and Deutsche Bank Aktiengesellschaft (DB) that are well-positioned to capitalize on the industry’s recovery.

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Forget Bank of America, Buy These 3 Financial Stocks Instead
 

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