3 Consumer Finance Stocks to Buy Now
Despite the subdued outlook issued by U.S. retailers of late, the consumer "remains healthy" -- and that's good news for three consumer finance stocks, according to Deutsche Bank analyst David Ho.
"Despite the uninspiring retail results in 1Q and a recent (and we think temporary) uptick in weekly jobless claims, our analysis of the U.S. consumer confirms what we've heard from management teams so far this year: the U.S. consumer remains healthy," the May 17 report said.
By analyzing various government and industry data and surveys, the analysts concluded that consumers are "more optimistic on real income growth and consumer credit and only slightly less positive on job security and unemployment," Ho wrote.
Surveys found that consumers reported an 84% likelihood of retaining their current job, down approximately 1% from last year, with middle-income consumers the most confident on job retention, the Deutsche Bank analyst noted. Consumers still place a low probability of unemployment rising a year from now -- though it has inched higher at 39%, up 3% from a year ago. Still, consumers are confident of finding another job within three months, the report said.
They are also willing to take on credit (partially funded by lower mortgage payments), despite the fact that consumer debt-to-income levels are still historically high, the report said.
"Through early May, credit card growth accelerated," but consumers are "very confident" in making on-time debt payments, Deutsche Bank said.
"Across all incomes, the probability of going delinquent in the next three months has been small and stable -- with nearly 90% expected likelihood of on-time payment," Ho wrote.
Deutsche Bank rates Ally Financial (ALLY) - Get Report , Discover Financial Services (DFS) - Get Report and Synchrony Financial (SYF) - Get Report each as a buy. Here's a snippet of what the analyst had to say about each stock.
