Here are some bargain bank stocks heading into -2-

He believes Citigroup currently offers "the best risk/reward" among large U.S. banks because of its continuing "self-help" through divestitures under CEO Jane Fraser and its long-term prospects for improving profitability. But he also thinks investors will want to see how hard Fraser "pushes back" against speculation in the media that the bank may be looking to make acquisitions.

An extraordinary bargain among bank stocks

On the list above, Capital One stands out, with its forward P/E declining to 8.9 from 11.6 at the end of 2025. That is the second-lowest forward P/E on the list. Capital One's stock has declined 20% this year. The company completed its acquisition of Brex on Tuesday, bringing in an AI-enabled platform used by issuers of corporate credit cards. When the deal was announced in January, Capital One CEO Richard Fairbanks said Brex had "invented the integrated combination of corporate credit cards, spend management software and banking together in a single platform."

So Capital One is going through a transformation as it integrates Discover, which it acquired in May and which has its own payment-processing system separate from those of Visa (V) and Mastercard (MA), as well as Brex's platform.

Under normal circumstances, Capital One's focus on credit cards would make for a healthy profit profile, because the high net interest margins for card lenders tend to make for high returns on equity, even when higher loan-loss rates are factored in.

Stucky laid out a case for a tremendous increase in value for long-term investors who can commit to Capital One.

The discussion begins with American Express, which can be considered the gold standard for the card industry, with its fees from charge cards, as well as a card lending business leading to very high returns on tangible common equity over the past two years. Return on tangible common equity, or ROTCE, has become a standard measurement of earnings power for banks, with the denominator excluding intangible assets, such as deferred tax assets, loan-servicing rights and goodwill.

American Express's forward P/E has declined to 17.2, down from 21.1 at the end of 2025. "Across financial services this quarter, we have seen some reactions to AI headlines," including stablecoins being "a threat" to payment networks, Sykes said. But he also said: "For us, American Express is also the brand, the trust and an ecosystem of engagement."

Longer term, Sykes expects that American Express will continue to innovate and "be in a position to take advantage of AI trends."

American Express trades at a discount to the S&P 500's SPX forward P/E of 19.4, according to LSEG's data. The S&P 500's average forward P/E over the past five years has been 20.4, according to the data provider.

"Capital One will never be an American Express because [its earnings are] mixed instead of fee-based," according to Stucky. He said that a 25% discount to American Express's P/E would "make sense."

If the S&P 500 were at a P/E of 20, and American Express were to trade at 90% of that level, its forward P/E would be 18. Then, if Capital One were to trade at 75% of American Express's P/E multiple, you would have "a 13.5 multiple for a mid-20s ROTCE business," according to Stucky.

"That is not unreasonable for a business of this quality," he said. And that 13.5 multiple would represent a 52% gain from the current multiple.

But Stucky went further, making a "conservative estimate" that Capital One's earnings per share could increase to $30 in 2030. Right now the consensus 12-month EPS estimate for Capital One is $21.52.

If we applied a 13.5 multiple to EPS of $30, we would have a share price of $405, more than double the stock's closing price of $192.46 on Wednesday.

Sykes said that under the direction of Fairbanks, Capital One has been "a long-term winner." He said that "any chance to take advantage of a Capital One weakness [in the stock price] has us pretty comfortable." Capital One is the 11th largest holding of the Gabelli Financial Services Opportunities ETF.

-Philip van Doorn

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

04-11-26 1456ET