With the Federal Reserve sounding more hawkish and futures markets pricing a 72% chance of a rate hike by September, many investors are rethinking where they want their money to work. Higher expected yields on safer assets can change the appeal of riskier choices, including Bitcoin and some growth stocks. In this environment, large U.S. value stocks with lower volatility and modest P/E and P/B ratios can look interesting to some investors. This article walks through 3 U.S. large cap value stocks that appear well aligned with this backdrop and are directly exposed to the latest Fed driven news story.

M&T Bank (MTB)

Overview: M&T Bank is a large U.S. regional bank that offers everyday banking, lending and wealth management services to consumers, small businesses and larger commercial clients through its branch network and digital channels.

Operations: M&T Bank generates all of its reported US$9.5b of revenue in the United States.

Market Cap: US$35.8b

Investors watching the Fed turn more hawkish may find M&T Bank interesting because it combines a long history in U.S. banking with solid profitability, record recent earnings and one of the higher net interest margins in the sector. The bank is using strong capital and liquidity to support dividends and ongoing buybacks, while loan and deposit growth, plus rising fee income, are feeding into higher net interest income. At the same time, credit metrics and non performing assets are described as improving, which helps support this growth-focused stance. The main watchpoints are deposit trends, commercial real estate exposure, costs and future regulatory demands. How these moving parts interact with a potential rate hike is where the story for M&T Bank gets more interesting.

M&T Bank’s strong net interest margin and recent record earnings hint at an earnings profile that many investors may be underestimating. See how the DCF valuation analysis for M&T Bank could reshape the risk reward picture.

PNC Financial Services Group (PNC)

Overview: PNC Financial Services Group is a large U.S. bank that offers day to day banking, lending and credit cards, as well as corporate lending, payments, capital markets advice and wealth management for individuals, businesses and institutions across the country.

Operations: PNC generates about US$15.5b of revenue from Retail Banking including residential mortgages, around US$11.8b from Corporate & Institutional Banking, and roughly US$1.8b from its Asset Management Group, with other activities offsetting some of this total.

Market Cap: US$99.4b

PNC Financial Services Group stands out in a potential rate hike setting because it combines diversified fee income, interest rate management tools such as swaps and a history of disciplined expense control with a value style P/E and a 3.2% dividend. Recent quarters featured strong loan growth, higher net interest income, record fee income and a sizeable 18% dividend increase, which together suggest earnings power that some investors may still be recalibrating. The flip side is meaningful deposit pricing pressure, insider selling and rising expenses, plus debate about how sustainable recent returns are as tangible book value has been under scrutiny. Understanding how PNC balances deposit costs, capital returns and growth ambitions is where the opportunity, and the key risks, really sit for long term investors.

PNC’s mix of loan growth, record fee income and that 3.2% yield hints at an earnings engine that the market may not have fully priced in yet. The 4 key rewards and 1 important warning sign could reveal what is quietly driving the story and what might interrupt it next.

U.S. Bancorp (USB)

Overview: U.S. Bancorp is a large U.S. financial services holding company that offers everyday banking, credit cards, loans, payments, wealth management and trust services to individuals, businesses, institutions and government clients across the country.

Operations: U.S. Bancorp generates about US$12.5b from Wealth, Corporate, Commercial and Institutional Banking, US$8.6b from Consumer and Business Banking, US$6.0b from Payment Services and US$0.4b from Treasury and Corporate Support, with all of its US$27.3b of revenue earned in the United States.

Market Cap: US$98.0b

Investors looking at U.S. Bancorp in the context of a possible Fed rate hike get a large, profitable bank with strong payments and fee income, a sizeable capital markets push following the BTIG acquisition and a dividend yield of 3.3%. Earnings are forecast to grow, and recent quarters featured record net revenue and raised guidance, yet the stock still trades well below some fair value estimates, which may appeal to value focused investors. The flip side is slower expected growth than the wider market, insider selling in recent months and ongoing credit and commercial real estate risks. How the bank balances higher rate sensitivity, digital and payments momentum, and credit discipline is where the real opportunity and the main risk now sits for U.S. Bancorp.

U.S. Bancorp’s earnings story, payments scale and 3.3% yield hint at a re rating that many investors may be missing. The analyst forecasts for U.S. Bancorp could reveal what might quietly flip this risk reward balance next.

The three stocks covered here are a useful starting point, but they are only a slice of the opportunity set, since the full U.S. Large-Cap Value Stocks screener surfaced 14 more companies with similarly compelling value metrics and narratives in the current Fed backdrop. To identify the highest conviction ideas, use Simply Wall St to analyze the U.S. Large-Cap Value Stocks screener so you can filter by the exact catalysts, risk profiles, and story drivers that matter most to your portfolio.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.