3 High-Yield Banks for Investors to Buy on the Dip
The Financial Sector (NYSEARCA: XLF) sent a ripple of fear through the broad market as concerns over loose lending practices resurfaced, but this is not the time to sell bank stocks. The news, while concerning, does not signal an imminent meltdown of the regional banking sector; it is more of a one-off event tied to a single bank that has already been accounted for.
Zions Bancorp is the culprit, revealing a $60 million provision and a $50 million write-down to be reflected in the upcoming earnings report.
However, the broader takeaway from the banking sector Q3 reports so far is that regional banks are holding up well. Here is a look at three regional banks that high-yield investors should keep on their radar.
Zions Bancorporation: Upgraded After Write-Down
Zions Bancorporation's (NASDAQ: ZION) $50 million write-down put it at the center of the sector-wide drop, but it is also a reason high-yielding bank stocks are attractive—especially after a 13% price correction.
The company’s balance sheet and cash flow can absorb the writedown, leaving its capital position healthy. As it stands, the payout ratio for this 3.75% yielding stock is below 35%, and there is an outlook for sustainable earnings growth to support the distribution.
The stock also comes with a history of annual distribution increases, suggesting investors can expect them to continue. The distribution CAGR is running at 5% in 2025, sufficient to outpace inflation and provide leverage for investor portfolios.
Coincidentally, the day following the write-off announcement, Robert W. Baird analysts upgraded the stock. They recognize that there is cause for the stock's steep selloff but view it as overdone, which has set the market up for a rebound.
They raised their rating to Outperform and set a price target of $65, in line with prevailing sentiment. The trends as of mid-October view this stock as a Hold, but coverage is increasing, sentiment is firming, and the consensus of $61 suggests a 30% upside over the next 12 months.
Fifth Third Bancorp: Outperforms in Q3, Rebound Underway
Fifth Third Bancorp (NASDAQ: FITB) reported its Q3 earnings the day following Zion Bancorpation’s announcement, outperforming the top and bottom lines and providing an optimistic outlook. Critical details include strong, nearly 8% revenue growth and the fourth consecutive quarter of improving operating leverage.
Management is leaning hard into portfolio quality and expense discipline, driving leverage earnings growth while improving its capital return outlook. Regarding capital returns, this stock yields nearly 4% after its price discount, and the distribution is less than 45% of the earnings outlook. It is expected to increase its distribution at a mid-to-high single-digit pace for the foreseeable future, while repurchasing shares.
Analyst trends for FITB stock are more robust than for Zions Bancorporation. They include increased coverage, firming sentiment, and an uptrend in the consensus, but sentiment is pegged at Moderate Buy compared to Hold.
The consensus forecasts a 25% as of mid-October, with the high-end nearly 20% above it, and institutions are buying. That group owns about 85% of the stock and has bought on balance each quarter in 2025, including the first weeks of Q4, running a balance of nearly $2 to $1 for the year.
U.S. Bancorp: Another Dividend-Paying Gem at a Discounted Price
U.S. Bancorp (NYSE: USB) shares fell along with the broader financial sector despite its solid results. The takeaway is that its decline was minimal, less than 2%, leaving its market aligned with a long-term reversal that may gain momentum over the next two quarters. Its Q3 earnings report includes the nearly 7% revenue growth, improving fee income, and the subsequent leverage they provide.
Earnings grew at a leveraged 8% pace, and the guidance was also robust. The company forecasts continued revenue growth, fee income to remain strong, and earnings leverage to improve in the upcoming quarters.
Analyst trends are also robust for this bank stock. MarketBeat tracks 22 with current ratings; their consensus is a Moderate Buy, and the bias is bullish, with 63% rated Buy or higher. Regarding the price targets, the revision trend is positive, indicating an 18% upside at the consensus, with potential for another 22% gain at the high-end target.
