In this article, we will take a look at the most profitable financial stocks to invest in.
The financial sector is among the most vulnerable sectors to macroeconomic shifts. That said, not all financial stocks are the same. While some consistently generate strong profits through disciplined risk management, others struggle to withstand economic shocks, such as a stringent regulatory environment and constantly changing interest rates.
That said, financial markets, especially equity markets, remain driven by a plethora of dynamic factors. An article by BlackRock, titled “A global macro outlook for 2026: patience,” highlights that the last three quarters of 2025 were defined by a comparatively “boring” rally. Published on January 3, the article outlines that moving into 2026, the overall positioning reflects restricted equity exposure, coupled with short positions in long-term government bonds and the US dollar.
Having said that, the 2026 outlook appears more closely tied to above-trend economic growth, supportive policy, and enhanced productivity, according to a “Investment Directions: 2026 outlook” publication by iShares on January 5. Although this will favor risk-taking, investors should closely monitor labor-market headwinds, elevated valuations, and an uncertain interest rate environment.
The article advances by citing a recent client survey that underpins rising market optimism. As stated,
“Nearly 50% of respondents in our latest client survey characterized themselves as bullish, and those who did were most likely to take risk in U.S. equities (48%) and emerging markets (24%). Investors identifying as bearish were more likely to look to developed markets abroad (24%) or consider Alts (24%).”
Keeping this macroeconomic outlook in mind, we have compiled a list of the most profitable financial stocks to invest in.
Copyright: kritchanut / 123RF Stock Photo
Our Methodology
To compile our list of the 11 most profitable financial stocks to invest in, we used the Stock Analysis screener to filter for stocks in the financial sector with a market capitalization of more than $2 billion that reported a net profit margin of over 20% and a 5-year average return on equity of at least 8%-10%. From this pool, we shortlisted the top 11 stocks with the highest trailing twelve-month (TTM) net income. These are then ranked in ascending order by net income. We also included data on hedge fund holdings in these companies based on Insider Monkey’s database, as of Q3 2025.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
11. The Charles Schwab Corporation (NYSE:SCHW)
Net Income (TTM): $8.42 billion
Profit Margin (TTM): 37.0%
Number of Hedge Fund holdings: 99
According to a January 22 report from The Fly, Barclays analyst Benjamin Budish reaffirmed his bullish view on The Charles Schwab Corporation (NYSE:SCHW) with an Overweight rating. The analyst also raised his price target to $125 from $120, following the Q4 results. According to the analyst, the results were in line with expectations, and the company provided a conservative outlook.
In its Q4 results a day earlier, The Charles Schwab Corporation (NYSE:SCHW) reported revenue of $6.34 billion, modestly below the $6.39 billion consensus. With core net new assets of $163.9 billion in Q4, total client assets rose 18% year-over-year to a record $11.9 trillion. Net interest margin (NIM) performance remained solid, with Q4 NIM coming in at around 2.9%, a 57 basis points improvement year over year.
For FY 2026, management guided to an NIM of 2.85%-2.95%, supported by modest expansion in average interest-earning assets relative to FY25. With FY26 adjusted expenses expected to increase by 5.5%-6.5% year over year, Schwab expects adjusted pre-tax margins to expand further into the low-50% range. Management noted that Forge Global (its recent acquisition) is not included in the FY26 guidance.
Encouraged by the results, President & CEO Rick Wurster stated,
Clients are conducting more of their financial lives at Schwab, with record engagement across wealth management, trading, and banking. Net inflows into our Managed Investing solutions grew by 36% versus 2024, while bank loan originations achieved another record year.
10. Banco Bilbao Vizcaya Argentaria, S.A. (NYSE:BBVA)
Net Income (TTM): $11.76 billion
Profit Margin (TTM): 32.9%
Number of Hedge Fund holdings: 12
On January 21, TheFly reported that Citi lifted the price target on Banco Bilbao Vizcaya Argentaria, S.A. (NYSE:BBVA) to EUR 23.50, up from EUR 21.50, and reiterated a Buy rating.
Earlier on January 9, BofA Securities also raised the price target on Banco Bilbao Vizcaya Argentaria, S.A. (NYSE:BBVA) to EUR 24.30 from EUR 21 and kept a Buy rating. Antonio Reale, an analyst at the firm, noted the company’s “enviable quality franchise with solid market shares” throughout its key markets in Mexico, Türkiye, and Spain.
With a 60% contribution to the company’s group profits, the Mexican market could benefit from a trade agreement with USMCA to resume near-shoring activities, and thus reduce volatility in the region. The Türkiye operations, on the other hand, are forecasted to witness substantial growth as profits are expected to approximately triple by 2028. This comes even amid higher provisions.
Banco Bilbao Vizcaya Argentaria, S.A. (NYSE:BBVA), based in Bilbao, Spain, provides retail and wholesale banking and asset management services. Founded in 1857, the company offers its products through online and mobile channels.
9. Royal Bank of Canada (NYSE:RY)
Net Income (TTM): $14.18 billion
Profit Margin (TTM): 32.7%
Number of Hedge Fund holdings: 29
On January 19, Matthew Lee, an analyst at Canaccord Genuity, reiterated a Buy rating on Royal Bank of Canada (NYSE:RY) and set a price target of C$242.
Separately on January 9, Scotiabank lifted the price target on Royal Bank of Canada (NYSE:RY) to C$242, up from C$231, and maintained an ‘Outperform’ rating.
Just last month, on December 17, BMO Capital also raised the price target on Royal Bank of Canada (NYSE:RY) to C$245 from C$229 and reaffirmed an Outperform rating. According to the firm, the bank is “firing on all cylinders,” given its refocused strategy and robust performance after the successful integration of HSBC Canada. This has enabled the bank giant to strengthen its footing in Canadian retail and commercial banking.
What’s even more noteworthy is the bank’s AI-related investments, BMO Capital noted, adding that these are forecasted to generate pre-tax pre-provision benefits in the range of $700 million to $1 billion.
Royal Bank of Canada (NYSE:RY) is a Canadian diversified financial service company. Founded in 1864, the company operates through five segments: Personal Banking, Commercial Banking, Wealth Management, Insurance, and Capital Markets.
8. Mastercard Incorporated (NYSE:MA)
Net Income (TTM): $14.25 billion
Profit Margin (TTM): 45.3%
Number of Hedge Fund holdings: 136
On January 20, Truist trimmed the price target on Mastercard Incorporated (NYSE:MA) to $609 from $630 and reaffirmed a Buy rating. This is part of the firm’s broader research note previewing the fourth quarter for the fintech group.
Earlier on January 13, Compass Point upgraded Mastercard Incorporated (NYSE:MA) to Buy from Neutral and set a price target of $735, which suggests an upside potential of 39%. Despite headwinds for payment stocks since August 1, 2025, the firm remains positive on payment networks relative to other companies in the long haul.
A day prior to this, TD Cowen lifted the price target on Mastercard Incorporated (NYSE:MA) to $668 from $654 and reiterated a Buy rating, citing “consistent spend behavior” that appears “broad-based and supportive.” Although geopolitical and macroeconomic risks continue to persist, the firm highlights that there was a “modest intra-quarter FX surprise” from the company.
Overall, Mastercard Incorporated (NYSE:MA) is a consensus buy, with 80% of the analysts recommending buying the stock and the remaining 20% holding a cautious view. With a 1-year median price target of $665, the stock has an upside potential of 24.79%.
Mastercard Incorporated (NYSE:MA) is a New York-based financial technology company that offers payment-related products and services. Founded in 1966, the company serves a diverse range of customers, including individuals, digital partners, businesses, and governments.
7. Banco Santander, S.A. (NYSE:SAN)
Net Income (TTM): $15.22 billion
Profit Margin (TTM): 26.8%
Number of Hedge Fund holdings: 16
On January 13, Kepler Cheuvreux upgraded Banco Santander, S.A. (NYSE:SAN) to Buy from Hold and substantially lifted the price target from EUR8.81 to EUR12.40. The firm associates this positive stance with an updated methodology that more accurately reflects technology’s impact on the bank’s valuation, which it believes was previously underestimated. Having said this, the firm now forecasts a 20% Return on Tangible Equity (RoTE) for the company by 2029.
For the 2025-26 financial period, Kepler Cheuvreux expects EUR12.4 billion in share buybacks, surpassing the bank’s initial target by an impressive 25%. Thus, through this uplift, the firm now fully accounts for the investment case, addressing what was previously described as a stretching gap between the earlier price target and the stock’s price.
Overall, Banco Santander, S.A. (NYSE:SAN) is a consensus Buy, with 82% of the analysts covering the stock bullish and the remaining 18% holding a cautious view. While the consensus 1-year median price target implies 4.01% upside, the highest and lowest estimates imply 17.28% upside and 20.73% downside, respectively.
Banco Santander, S.A. (NYSE:SAN), headquartered in Madrid, Spain, is a provider of a diverse range of financial products and services to individuals, enterprises, and corporations. Incorporated in 1856, the company operates through five segments, including Retail & Commercial Banking, Wealth Management & Insurance, and Payments.
6. Morgan Stanley (NYSE:MS)
Net Income (TTM): $16.25 billion
Profit Margin (TTM): 24.0%
Number of Hedge Fund holdings: 69
On January 16, RBC Capital lifted the price target on Morgan Stanley (NYSE:MS) to $207 from $185 and maintained a Sector Perform rating. The firm said that the investment bank’s solid business model, supported by Institutional Securities, Wealth Management, and Investment Management, demonstrated robust results driven by investment banking and trading operations.
According to RBC Capital, this diversified business model has helped Morgan Stanley (NYSE:MS) to deliver an impressive return on tangible common equity (ROTCE) of over 20% to shareholders. A segment that particularly stood out was Wealth Management, a division that reported 31% pre-tax margin. Through its capital return initiatives, the bank is expected to return up to 100% of its earnings to shareholders, the firm noted.
A day earlier, Morgan Stanley (NYSE:MS) reported fourth-quarter FY25 financial results, delivering an EPS of $2.68 and revenue of $17.9 billion, thus outperforming projections of $2.41 and $17.72 billion, respectively. Since the announcement, the stock has declined by approximately 7%.
Morgan Stanley (NYSE:MS) is a New York-based financial holding company that provides a range of financial products and services. Incorporated in 1924, the company operates through three segments: Institutional Securities, Wealth Management, and Investment Management.
5. The Goldman Sachs Group, Inc. (NYSE:GS)
Net Income (TTM): $16.3 billion
Profit Margin (TTM): 28.9%
Number of Hedge Fund holdings: 75
On January 20, RBC Capital lifted the price target on The Goldman Sachs Group, Inc. (NYSE:GS) to $1,030 from $900 and maintained a Sector Perform rating, citing “robust market conditions” that led to beat results across many of the bank’s businesses. According to the firm, the bank is a “preeminent global investment bank with a leading position in the global markets.”
The Goldman Sachs Group, Inc. (NYSE:GS) has remained the top Global M&A Advisor for the last 20 years, RBC Capital noted, adding that the bank stands among the top investment banks in high-yield and leverage loan portfolios. The firm also highlighted that the bank is well capitalized and has been a “good steward of shareholders’ capital,” with its approximately 46% decline in share count since its peak in the first quarter of 2010.
Four days earlier, Keefe, Bruyette & Woods (KBW) increased the price target on The Goldman Sachs Group, Inc. (NYSE:GS) to $1,000 from $971, while reiterating a Market Perform rating. Christopher McGratty, an analyst at KBW, highlighted that “business momentum is exceptionally strong” in the bank’s investment banking and trading segments.
The Goldman Sachs Group, Inc. (NYSE:GS) is a New York-based financial institution offering a range of financial services. Founded in 1869, the company operates through three segments: Global Banking & Markets, Asset & Wealth Management, and Platform Solutions.
4. Visa Inc. (NYSE:V)
Net Income (TTM): $19.85 billion
Profit Margin (TTM): 50.2%
Number of Hedge Fund holdings: 179
On January 20, TheFly reported that Truist cut the price target on Visa Inc. (NYSE:V) to $374 from $392 and maintained a Buy rating. This downward revision in price is part of a broader research note previewing Q4 earnings in the fintech group.
The firm believes the quarter’s results should be strong, despite the likelihood of challenging YoY comparisons that could restrict volume-related outperformance. That said, even though Truist is bullish on the group for 2026, some management teams may try to lower Street estimates by reaffirming their initial guidance.
Earlier on January 13, UBS reiterated its Buy rating and $425 price target on Visa Inc. (NYSE:V). The firm projects the company’s net revenue growth to increase modestly in FY26 relative to the projection of nearly 11.5% organic constant currency growth for FY25. What’s even more interesting is that this expansion is expected to occur even without the backing from OBBBA-associated spending benefits that had majorly contributed to growth previously.
Visa Inc. (NYSE:V) is a leading payments technology company based in California that promotes digital currency. Founded in 1958, the company serves private clients, financial entities, government institutions, and merchants in over 200 countries and territories.
3. Wells Fargo & Company (NYSE:WFC)
Net Income (TTM): $20.28 billion
Profit Margin (TTM): 26.7%
Number of Hedge Fund holdings: 76
On January 15, TD Cowen slightly cut the price target on Wells Fargo & Company (NYSE:WFC) to $100 from $102 and reiterated a Hold rating. This follows the company’s fourth-quarter results, which reported a miss on the top line but impressive underlying organic growth.
On the same day, Truist Securities also trimmed the price target on Wells Fargo & Company (NYSE:WFC) to $100 from $104 and maintained a Buy rating on the banking powerhouse. The price reduction is driven by a 2-3% decline in EPS for 2026 and 2027, primarily due to higher estimated fee income and elevated costs. That said, the firm lowered its 2026 EPS guidance to $6.95 from $7.15 and its 2027 EPS forecast to $8, a $0.15 drop from its previously anticipated figure.
The revised model now includes about 5% annual revenue growth and 1-2% expense growth over the upcoming two years. This matches Wells Fargo & Company (NYSE:WFC)’s new expense expectation of approximately $55.7 billion for 2026.
Wells Fargo & Company (NYSE:WFC), headquartered in San Francisco, is a financial services company incorporated in 1852. With four main segments: Consumer Banking and Lending, Commercial Banking, Corporate and Investment Banking, and Wealth and Investment Management, the company considers satisfying the clients’ financial needs as its mission.
2. Bank of America Corporation (NYSE:BAC)
Net Income (TTM): $29.06 billion
Profit Margin (TTM): 28.4%
Number of Hedge Fund holdings: 111
On January 22, Reuters reported that Bank of America Corporation (NYSE:BAC) is weighing options to introduce new credit cards offering a 10% interest rate to meet President Donald Trump’s demands, according to a source familiar with the matter.
Separately, TD Cowen trimmed the price target on Bank of America Corporation (NYSE:BAC) to $64 from $66 and maintained a Buy rating on January 15. This downward price adjustment, suggesting an upside potential of 23%, comes after the bank’s fourth-quarter 2025 results, in which it surpassed market expectations by delivering a core EPS of $0.98. This was mainly fueled by a pullback in provisions and slight net interest income upside.
Since the company’s earnings announcement on January 14, BAC has declined by approximately 2%. TD Cowen attributed this drop to the bank’s near-term operating leverage projection of 200 basis points for FY26, now at the bottom end of its medium-term range of 200 to 300 basis points. Despite this, TD Cowen remains optimistic about Bank of America Corporation (NYSE:BAC)’s overall performance.
Bank of America Corporation (NYSE:BAC) is a North Carolina-based provider of various financial products and services. Founded in 1784, the bank operates through four segments: Consumer Banking, Global Wealth & Investment Management (GWIM), Global Banking, and Global Markets.
1. JPMorgan Chase & Co. (NYSE:JPM)
Net Income (TTM): $55.68 billion
Profit Margin (TTM): 33.9%
Number of Hedge Fund holdings: 120
On January 22, JPMorgan Chase & Co. (NYSE:JPM) successfully completed $6 billion worth of public offerings. This includes $400 million of floating-rate notes payable in 2032, $3 billion of fixed-to-floating-rate notes due 2037, and $2.6 billion of fixed-to-floating-rate notes maturing in 2032. While diversifying and extending the maturity profile, this new debt offering will support the company’s current financing and liquidity management initiatives.
Earlier on January 14, TD Cowen reiterated its Buy rating on JPMorgan Chase & Co. (NYSE:JPM), with an unchanged price target of $400. With the highest 1-year price target among analysts, it implies an upside potential of 34.35% from the current price level. This optimism follows the bank’s fourth-quarter earnings results, in which the bank delivered core EPS, which was $0.21 and $0.37 higher than TD Cowen’s estimates and the Street consensus, respectively.
Although JPMorgan Chase & Co. (NYSE:JPM) reported positive earnings on January 13, the stock has declined by nearly 2.3%. This is partly attributed to lower-than-anticipated investment banking fees for the quarter.
JPMorgan Chase & Co. (NYSE:JPM) is a New York-based financial services company operating through three segments: Consumer & Community Banking, Commercial & Investment Banking, and Asset & Wealth Management.
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