Here are some bargain bank stocks heading into earnings season

By Philip van Doorn

A close look at valuations for the largest U.S. banks highlights opportunities for long-term investors

The valuation for Capital One's stock is especially compelling for long-term investors, according to Matt Stucky, the chief portfolio manager at Northwestern Mutual Wealth Management, and Macrae Sykes, who manages the Gabelli Financial Services Opportunities ETF.

Most of the largest U.S. banks are trading at lower forward price-to-earnings valuations than they were at the end of 2025, even as earnings estimates have increased for all of them.

Three banking-industry experts discussed opportunities for long-term investors heading into earnings season during interviews with MarketWatch. Goldman Sachs (GS) will announce its second-quarter results on Monday, followed by JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC) on Tuesday and Bank of America (BAC) and Morgan Stanley (MS) on Wednesday.

Before digging into those comments, let's look at forward price-to-earnings ratios for 20 of the largest U.S. banks. There are 24 stocks in the Invesco KBW Bank exchange-traded fund KBWB, which tracks the KBW Nasdaq Bank Index BKX, and 149 in the State Street SPDR Regional Banking ETF KRE, which tracks the S&P Regional Banks Select Industry Index. The following list includes the 17 largest banks by total assets in either of these exchange-traded funds, with Charles Schwab (SCHW), American Express (AXP) and Ally Financial (ALLY) added, since they are all bank holding companies with at least $150 billion in deposits.

A stock's forward P/E is its price divided by the consensus 12-month earnings-per-share estimate among analysts polled by LSEG. A bank's forward P/E may have declined even though its share price increased from the end of last year through Wednesday, if its rolling 12-month EPS estimate increased enough. This was the case for Citigroup (C), for example.

The list of 20 banks is sorted by Dec. 31 total assets and includes forward P/E ratios at Wednesday's close and at the end of 2025, as well as changes in the "P" and in the "E" so far this year. The price changes exclude dividends.

   Company                          Forward P/E  Forward P/E as of Dec. 31  2026 price change  Change in rolling 12-month EPS estimate  Total assets ($billion) 
   JPMorgan Chase                          13.8                       15.2              -4.4%                                     5.3%                   $4,425 
   Bank of America                         11.3                       12.6              -5.7%                                     4.8%                   $3,412 
   Citigroup                               11.2                       11.6               5.8%                                    10.1%                   $2,657 
   Wells Fargo                             11.5                       13.2              -9.2%                                     4.9%                   $2,149 
   Goldman Sachs Group                     14.8                       15.6               3.0%                                     8.7%                   $1,809 
   Morgan Stanley                          14.8                       16.5              -0.9%                                    10.3%                   $1,420 
   U.S. Bancorp                            10.5                       10.8               3.7%                                     6.7%                     $692 
   Capital One Financial                    8.9                       11.6             -20.6%                                     2.8%                     $669 
   PNC Financial Services Group            11.5                       11.6               5.8%                                     7.4%                     $574 
   Truist Financial                        10.5                       11.0               0.2%                                     5.0%                     $548 
   Charles Schwab                          15.2                       17.8              -3.2%                                    13.4%                     $491 
   Bank of New York Mellon                 14.5                       14.2              10.2%                                     7.6%                     $472 
   State Street                            10.9                       11.3               5.5%                                     9.3%                     $366 
   American Express                        17.2                       21.1             -14.5%                                     5.1%                     $300 
   Citizens Financial Group                11.5                       11.6               9.2%                                    10.3%                     $226 
   Huntington Bancshares                    9.6                       10.2              -5.8%                                     0.0%                     $225 
   Fifth Third Bancorp                     11.9                       12.7               5.4%                                    13.0%                     $214 
   M&T Bank                                11.2                       10.7               8.7%                                     4.0%                     $214 
   Ally Financial                           7.4                        8.4              -7.9%                                     3.7%                     $196 
   KeyCorp                                 11.1                       11.6               3.1%                                     7.3%                     $184 
                                                                                                                                                   Source: LSEG 

You might need to scroll the table or flip your screen to landscape to see all of the data. You can click on the tickers for more information, including profiles of each bank and dividend yields for the stocks.

What to look (or listen) for when the banks report

Macrae Sykes is the portfolio manager of the Gabelli Financial Services Opportunities ETF GABF. He said that at the beginning of 2026, investors were enthusiastic about banks because of the "fruitful environment with regulatory tailwinds, a good M&A environment and steepening yield curve, with upbeat feelings for the economy."

A lot has changed since then, with the Iran conflict, the spike in energy prices and an evolving outlook for monetary policy. The Federal Open Market Committee is expected to make one cut to short-term interest rates this year, while Federal Reserve's previous economic projections had implied two or three cuts.

This earnings season Sykes expects to see slow loan growth but also "a fiscal tailwind" from tax refunds and a benefit to banks involved with underwriting and merger deals. Initial public offerings of stock (and concurrent fees to investment banks) may spike with an expected near-term offering of SpaceX shares, as well as efforts to take artificial-intelligence companies OpenAI and Anthropic public.

He said U.S. consumers seemed to be "in pretty good shape," with stable credit quality, even as investors were concerned about private credit.

So even as "you have to build in some risk premium, with inflation and the [Iran conflict possibly] being dragged out ... one can argue that the [IPO and underwriting] pipeline should be converted," Sykes said.

Matt Stucky, the chief portfolio manager at Northwestern Mutual Wealth Management, said that investors would be looking for more clarity next week about banks' exposure to private credit. Nonbank lenders that aren't publicly traded, including some business development companies, have been facing a spike in redemption requests that could be difficult or impossible to meet because there is no liquid market for the loans.

Stucky said that among major banks, there was roughly a 4% exposure within loan portfolios to nondepository financial institutions.

He also said U.S. consumers had been showing resiliency despite the increase in gasoline prices.

When discussing the "higher for longer" scenario with fewer interest-rate cuts by the Fed, Stucky said this would actually be a positive factor for most of the large banks, including Bank of America, which pays next to nothing for checking-account deposits. Reductions in short-term rates were more likely to benefit American Express (AXP) and Capital One Financial (COF), he said.

Ebrahim Poonawala, the head of research for North American banks at BofA Securities, said a reduced number of rate cuts by the Fed would be "generally constructive for the two most asset-sensitive," namely JPMorgan Chase and Wells Fargo. "But it is positive for all the big money-center banks," he said.

An asset-sensitive bank is one for which loans reprice more quickly than deposits. This means that its net interest margin widens when short-term rates rise. A liability-sensitive bank will benefit quickly from a decline in short-term rates, as its cost of funds declines more rapidly than its loans mature and are renewed at lower rates.

In a report on Tuesday, Poonawala predicted that "three C's" would dominate bank executives' earnings calls next week. These are capital-market resiliency, capital deployment and credit quality.

Capital deployment is an important subject for bank-stock investors as banks increase dividends and repurchase stock to reduce share counts and lift earnings per share. This could be a year of extraordinary increases in capital deployment, because the Federal Reserve's board of governors announced on Feb. 4 that the regulator's annual stress tests would be on hold until 2027. The banks will continue to operate under the Fed's mid-2025 capital guidelines.

Poonawala wrote in his Tuesday report that among the banks covered by his team, JPMorgan Chase was best positioned to deploy capital. He called it "a top choice for medium- to longer-term investors."

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