These ASX bank stocks just got upgraded by top brokers to "buy" – and they aren't the big four

The big four banks have staged a massive rally. If you want to find value, you might have to look at their smaller rivals which just got upgraded by brokers to "buy".

The bulls refuse to take any sell-off lying down! The S&P/ASX 200 Index (Index:^AXJO) rebounded from its morning sell-off triggered by a weak lead from Wall Street, but eager bargain hunters soon turned the market around.

The top 200 benchmark fell nearly 1% in the first 15 minutes of trade but clawed back to be 0.5% in the black during lunch time trade.

However, the big banks remain under pressure after their big rally pushed them closer to fair value. If you are looking for attractive buys, you may need to look at their smaller rivals as brokers just upgraded three of them to "buy".

Improving margin

One stock that got moved to the "buy" list is Bendigo and Adelaide Bank Ltd (ASX: BEN).

JP Morgan changed its recommendation on the regional bank to "overweight" from "neutral" today as it believes that the market isn't fully appreciating the upside.

"With COVID-19 infection rates under control in Australia and lockdown rules easing, there is increased optimism that the Jun-20 quarter trough in the economy will not be as bad as first thought," said the broker.

"Recent data have pointed to improvements in term deposit spreads. This is likely to continue."

JP Morgan's price target on Bendigo Bank is $8.10 a share.

Cum-upgrade cycle

Another bank stock that is under appreciated by the market is the Bank of Queensland Limited (ASX: BOQ) share price.

Goldman Sachs also upgraded its call on BOQ to "buy" from "neutral" as it believes consensus earnings forecasts are too conservative.

"We now have more confidence that BOQ will be able to reach its management target of broadly flat 2H20E NIMs [net interest margins], and sit c.8% above Bloomberg FY21E consensus," said the broker.

Goldman Sachs increased its price target on the stock to $7.17 from $5.51 a share.

Small cap bank buy

Coincidentally, another Queensland-based bank also got upgraded by Bell Potter to "buy" from "hold". This is small cap lender Auswide Bank Ltd (ASX: ABA).

Auswide is Australia's newest bank as it mothed from its previous form as a credit union called Wide Bay Australia.

The broker believes that if the re-rating were to be applied to Auswide, fair value for the stock would increase by 17% to $5.15 a share.

A re-rating is when the implied discount rate on a sector's valuation is lowered due to higher investor confidence.

Further, Auswide is also sitting on a reasonable forecast yield of 4.5% even after Bell Potter cut its forecast final dividend by 53%.

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Bank Shares

Bank building with the word bank in gold.
Bank Shares

If I invest $15,000 in NAB shares, how much passive income will I receive in 2027?

Is NAB a strong option for dividends?

Read more »

Happy young woman saving money in a piggy bank.
Bank Shares

How many CBA shares do I need to buy for $10,000 of passive income?

The banking giant is popular with income investors for a reasons.

Read more »

couple happily discussing their issues with a banker
Bank Shares

Bendigo and Adelaide Bank vs Bank of Queensland: Which is better value?

Comparing Bendigo and Adelaide Bank vs Bank of Queensland shares: which regional bank looks better value on recent fundamentals and…

Read more »

Four business people wearing formal business suits and ties walk abreast on a wide paved surface with their long shadows falling on the ground ahead of them.
Bank Shares

Westpac vs Macquarie Group: Which bank is better value now?

Westpac vs Macquarie Group: which bank share offers Aussies better value for October? Here’s how the heavyweights compare on dividends,…

Read more »

Australian dollar notes in businessman pocket suit, symbolising ex dividend day.
Bank Shares

If I invest $8,000 in CBA shares, what passive income could I earn in FY27 and FY28?

Brokers aren't too bullish about the outlook for the bank shares over the next 12 months, but its passive income…

Read more »

Couple using their digital tablet together.
Bank Shares

Are CBA shares still worth buying near $150?

I look at whether the recent pullback has made this major bank more attractive today.

Read more »

Bank written on a brown building.
Bank Shares

Westpac vs NAB shares: Which big bank is the better buy?

I compare Westpac and NAB shares for value, yield and momentum – here’s which bank I’d buy now.

Read more »

A man in a suit smiles at the yellow piggy bank he holds in his hand.
Bank Shares

If I invest $10,000 in CBA shares today, what could they be worth in October 2027?

Find out what brokers expect next out of CBA shares.

Read more »