Expectations of interest rate cuts have led to some gains in the markets this month, showing that investors remain confident in the current rally. Overall, the year-to-date returns are impressive, even taking the springtime correction into account. The S&P 500 has gained 12% this year, and the NASDAQ is up ~16% over the same period.
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As JFK said, a rising tide lifts all boats – and in today’s rising market tide, the question is which boats will rise the most. Answer that, and you can set up a solid portfolio for the coming months.
Cantor analyst Dave Rochester believes that bank stocks should be in the mix. “Lower interest rates, a continued healthy economic backdrop, and an ongoing focus on reducing problem assets mean credit trend tailwinds for the banks in a stable macro backdrop, which should help constrain provision growth outside of stronger loan growth in FY25/26,” Rochester says. “Valuation remains attractive vs. the market with the expectation for banks to return to double-digit EPS growth for the next two years with M&A acceleration, in the context of banks’ below-historical relative P/Es vs. the S&P 500.”
The analyst goes on to select two bank stocks in particular as names to buy, now that it’s time to go long on banks. We’ve used the TipRanks platform to look up the overall Wall Street view on both Cantor picks. Here are the details.
Citizens Financial Group (CFG)
We’ll start with Citizens Financial Group, a Rhode Island-based bank holding company. Citizens traces its roots to 1828, and in today’s incarnation it is a $22 billion firm best known as the parent company of Citizens Bank.
As of June 30, Citizens Bank reported total assets of $220.1 billion, including $177.6 billion in deposits. The bank operates through 1,000 branches and 3,100 ATMs, spread across 14 states plus DC. The bank is active in such large states as New York, Pennsylvania, Ohio, and Florida, as well as smaller states such as Rhode Island, Delaware, and Connecticut.
Like many bank companies, Citizens has a history of returning capital to shareholders through a reliable dividend payment. The company last declared the dividend payment on July 17 for 42 cents per common share. At this rate, the dividend annualizes to $1.68 per share and gives a forward yield of 3.24%. The dividend was paid out on August 14.
In addition to the dividend, the company also has a regular stock repurchase program, and bought back $200 million worth of shares in both Q1 and Q2 of this year.
The company’s capital return is backed up by sound financial performance. Citizens last reported results for 2Q25, and in that quarter the banking company had a top line of $2.04 billion. This was up 4% year-over-year, and beat the forecast by $30 million. At the bottom line, the bank reported adj. earnings of 92 cents per share, a figure that fully covered the dividend and beat the estimates by 4 cents per share.
For Cantor analyst Rochester, this stock is a Top Pick, which he explains in reference to the company’s potential for improved income going forward. He writes, “We expect stronger NIM will be driven at least partially by the continued upward reprice of fixed rate earning assets, along with the continued roll-off of lower-rate receive-fixed swap positions at some banks, which we expect could drive meaningful NII/NIM improvement at some of our banks, including at CFG, our Top Pick in our coverage, where we estimate this benefit could amount to ~50% of NII improvement we expect at the bank over the next two years.”
Getting into specifics, the Cantor analyst adds, “We expect EPS growth of 17.2%/38.1%/22.3% in FY25/26/27, respectively, and +430/560 bps in core ROTCE to 14.6%/15.9% in FY27/4Q27 from 10.3% in FY24, hitting the low end of mgmt.’s 16%-18% ROTCE target, all of which should drive solid trading multiple expansion, supportive of a stronger P/E and at least an in line P/TBV vs. the group multiple (the group trades at 10.7x FY26E EPS and a P/TBV of 1.68x), equating to solid share price outperformance, as both sets of trends compare much more favorably vs. those of the group/peers.”
This stance backs up Rochester’s Overweight (i.e., Buy) rating on the stock. His price target, of $61, points toward a one-year gain of 19%. (To watch Rochester’s track record, click here)
There are 14 recent reviews on record for CFG, and the split, 10 Buys and 4 Holds, gives the stock its Moderate Buy consensus rating. The shares are currently priced at $51.13 and their $56.38 average price target implies an upside of 10% in the coming year. (See CFG stock forecast)
Flagstar Financial (FLG)
The second bank stock we’ll look at is Flagstar Financial, which you may know better under its previous name, New York Community Bancorp. The company acquired Flagstar Bank as a subsidiary in December of 2022, and in February of last year it rebranded all of its bank branches under the Flagstar name. In October of last year, the company rebranded itself as Flagstar Financial, with Flagstar Bank as its wholly owned banking subsidiary. As part of that rebranding, the company changed its stock ticker from NYCB to FLG. Flagstar Financial currently has a market cap of ~$5 billion.
The company’s Flagstar subsidiary is headquartered in Michigan, and is a fast-growing regional bank. Its presence is strongest in the upper Midwest, and it also has growing footprints in the metropolitan area of New York and New Jersey; in Florida; and on the West Coast. In all, Flagstar Bank has some 360 branch locations. The banking operations are backed by the holding company’s assets, which include $69.7 billion in deposits and $64.4 billion in loans.
Turning to the most recent financial results, for 2Q25, we see that Flagstar’s revenue came to $496 million, down 26% year-over-year and missing the forecast by $22 million. The company ran a net loss in the quarter of 14 cents per share; while this missed the forecast by a penny, it did mark a solid turnaround from the $1.05 EPS loss reported in the second quarter of last year.
The company’s rebranding to Flagstar was part of a general streamlining of the business, and when we check in again with Dave Rochester, we find that the analyst is upbeat about the firm’s long-term prospects. He writes, “Although uncertainty remains on the timing on the return of net loan growth, profitability, and the degree to which mgmt. continues to execute successfully on the C&I platform buildout, with over 100 new hires since June 2024, and plans to hire up to another 50 commercial bankers in 2H25, we believe that shares could sustain material upside over the next year were a double-digit ROTCE expectation in FY27 to continue to hold. Although we, and consensus, appear to sit below mgmt. EPS expectations for FY27, we expect a double-digit return (we model ~10% for FY27, and close to 11% in 2H27) to garner at least a valuation close to TBV/share one year out, which we estimate in our base case could range near $16/sh +/- in 2Q26.”
Rochester quantifies his outlook on FLG with an Overweight (i.e., Buy) rating, and a price target of $15 that suggests a 24% gain in the months ahead.
This stock’s Moderate Buy consensus rating is based on 11 recent analyst reviews that include 5 Buys and 6 Holds. The shares are trading for $12.10 and have an average target price of $13.70, implying that FLG will appreciate by 13% by this time next year. (See FLG stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.