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Three Bargain Bank Stocks to Watch in 2025

According to Wells Fargo, there are promising buying opportunities among regional bank stocks despite a challenging year for the sector.

The SPDR S&P Regional Banking ETF (KRE) has declined approximately 5% in 2025, reflecting investor concerns over economic uncertainty. However, analyst Timur Braziler believes the market has overreacted.

In a March 11 note, he stated, “Banks are a proxy for economic uncertainty, but we believe the pendulum swung too far,” highlighting value in what he calls “bargain banks.” These stocks also offer attractive dividend yields, adding to their appeal.

Catalysts for a Regional Bank Rebound

Braziler identifies three key catalysts that could drive a recovery in regional banks:

1. Earnings Per Share Inflection
   Braziler anticipates positive EPS growth for the first time in three years, starting in Q2 2025. He attributes this to fixed asset repricing and lower funding costs, despite seasonal challenges in the near term. “The recent pullback in the group warrants being early,” he noted.

2. Valuation Upside
   Alongside EPS growth, Braziler expects valuations to improve. If regional banks maintain their historical multiples, he sees potential upside of at least 30%. “As the EPS inflection plays out and the economic outlook becomes less volatile, regionals stand to benefit the most from new generalist or long-only interest,” he explained.

3. Mergers and Acquisitions Surge
   M&A activity is expected to increase around the EPS inflection point. Braziler points to a favorable regulatory environment—the best in 30 years—and declining yields aiding purchase accounting as significant tailwinds, despite heightened uncertainty.

Top Picks: Bargain Basement Bank Stocks

Braziler highlights three regional bank stocks as standout opportunities:

1. BankUnited (BKU)

   • Performance: Down 9% year-to-date

   • Dividend Yield: 3.3%

   • Valuation: Trading at 89% of tangible book value

   • Analysis: The management team is open to partnerships, and while more than half of analysts rate it a hold (per LSEG), consensus price targets suggest 25% upside from current levels.

2. Webster Financial (WBS)

   • Performance: Down 6% year-to-date

   • Dividend Yield: 3.1%

   • Valuation: Trading below eight times EPS with a 17% return on tangible common equity

   • Analysis: Positioned to benefit from M&A, Webster enjoys strong Wall Street support, with 13 of 15 analysts rating it buy or strong buy (per LSEG). Consensus targets indicate nearly 35% upside.

3. Banc of California (BANC)

   • Performance: Down 8% year-to-date

   • Dividend Yield: 2.8%

   • Valuation: Trading at 85% of tangible book value

   • Analysis: Braziler calls it “too good a deal to pass up.” Eight of 11 analysts rate it buy or strong buy (per LSEG), with consensus targets pointing to 32% upside.

Despite pressures on the regional banking sector in 2025, Wells Fargo sees significant potential in these undervalued stocks. With catalysts like EPS growth, valuation improvements, and M&A activity on the horizon, BankUnited, Webster Financial, and Banc of California stand out as compelling opportunities for investors seeking both value and income.

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