In this article, we will be taking a look at the 12 best bank stocks to buy now. To skip our detailed analysis of these stocks and the banking sector, you can go directly to see the 5 Best Bank Stocks to Buy Now.
In the aftermath of the pandemic and amid recession fears and rising interest rates, the stock market has been struggling throughout 2022. Banking and finance stocks were not spared at the start of the year, but have begun to make a comeback in recent months. Many renowned names in the banking sector began to outperform the S&P 500 at the end of June, a rally that has since continued into August.
JPMorgan Chase & Co. (NYSE:JPM), Morgan Stanley (NYSE:MS), and the Goldman Sachs Group, Inc. (NYSE:GS) are among the renowned bank stocks that have been outperforming the S&P 500 this year. According to the Wall Street Journal, five of the six largest U.S. banks had beaten the broader benchmark’s 13% gains since the end of June (through August 17). Morgan Stanley (NYSE:MS), and Goldman Sachs Group, Inc. (NYSE:GS) were among them, gaining 21% and 19%, during that period, while JPMorgan Chase & Co. (NYSE:JPM) fell just short at 9% gains.
In July, American bank stocks rallied more strongly than they had in 18 months, led by Citigroup Inc.’s (NYSE:C) robust second-quarter earnings results. Bloomberg reported that Citigroup Inc. (NYSE:C) shares gained 13% on July 15, marking their strongest performance since March 2020. The KBW Bank Index also outperformed the gains of the S&P 500 index in July, rising by 5.8%. As such, bank stocks have begun to regain their popularity among investors, making it a great time to look into some of the best banks stocks to buy today.
Photo by Mikel Parera on Unsplash
Our Methodology
We have selected bank stocks that were highly popular among the 895 hedge funds tracked by Insider Monkey that filed 13Fs for the second quarter reporting period. The stocks are ranked based on the number of hedge funds holding stakes in them, from the lowest to the highest. These stocks have mostly positive analyst ratings and favorable price targets. We have considered their latest earnings results, projected EPS growth over the next three to five years, dividend growth rate where applicable, and many more factors while selecting these stocks.
Best Bank Stocks to Buy Now
12. HSBC Holdings plc (NYSE:HSBC)
Number of Hedge Fund Holders: 14
HSBC Holdings plc (NYSE:HSBC) is a financial institution providing banking and financial services worldwide. The company operates through its Wealth and Personal Banking, Commercial Banking, and Global Banking and Markets segments. It is based in London, United Kingdom.
On August 8, Benjamin Toms, an analyst at RBC Capital, reiterated an ‘Outperform’ rating on HSBC Holdings plc (NYSE:HSBC) shares.
This month, HSBC Holdings plc (NYSE:HSBC) announced plans to reinstate its quarterly dividends beginning in 2023. The bank also raised its guidance, now targeting a reported return on tangible equity of 12% for 2023. HSBC Holdings plc (NYSE:HSBC) also raised its net interest income expectations from $26.5 billion to $31 billion in 2022 and to $37 billion in 2023.
In the second quarter, 14 hedge funds were long HSBC Holdings plc (NYSE:HSBC), with a total stake value of $139 million. Of these funds, Renaissance Technologies was the largest stakeholder in the company, holding 2.92 million shares worth $95.3 million.
HSBC Holdings plc (NYSE:HSBC), like JPMorgan Chase & Co. (NYSE:JPM), Morgan Stanley (NYSE:MS), and Goldman Sachs Group, Inc. (NYSE:GS), is a financial stock institutional investors are pouring into today.
11. Fifth Third Bancorp (NASDAQ:FITB)
Number of Hedge Fund Holders: 32
Fifth Third Bancorp (NASDAQ:FITB), a diversified financial services company based in the U.S., offers credit intermediation, cash management, and financial services. The company also provides several deposit and loan products.
The company’s net interest income came in at $1.3 billion this June, driven by higher interest rates. The net interest margin for Fifth Third Bancorp (NASDAQ:FITB) in the second quarter was 2.9%, higher than the 2.5% margin in the previous quarter.
An ‘Overweight’ rating was reiterated on Fifth Third Bancorp (NASDAQ:FITB) shares on July 22 by analyst Jason Goldberg. The analyst also holds a $53 price target on the stock.
There were 32 hedge funds long Fifth Third Bancorp (NASDAQ:FITB) in the second quarter, compared to 41 hedge funds in the previous quarter. Their total stake values were $276 million and $618 million respectively.
10. East West Bancorp, Inc. (NASDAQ:EWBC)
Number of Hedge Fund Holders: 35
Like JPMorgan Chase & Co. (NYSE:JPM), Morgan Stanley (NYSE:MS), and Goldman Sachs Group, Inc. (NYSE:GS), East West Bancorp, Inc. (NASDAQ:EWBC) is a financial stock steadily gaining popularity among hedge funds today. Citadel Investment Group was the largest stakeholder in East West Bancorp, Inc. (NASDAQ:EWBC) in the second quarter out of the 35 hedge funds in total that were long the stock. Ken Griffin’s fund held 1.38 million shares in the company, worth $89.4 million, while the total stake value of all the hedge funds long the stock was $511 million.
East West Bancorp, Inc. (NASDAQ:EWBC) is the bank holding company for East West Bank. The company provides personal and commercial banking services to businesses and individuals. It operates through its Consumer and Business Banking, Commercial Banking, and Other segments.
East West Bancorp, Inc. (NASDAQ:EWBC) had EPS of $1.81 in the second quarter, beating estimates. The company’s revenue was $551 million, up 23.9% year-over-year also beat estimates, by $26 million. Over the next three to five years, East West Bancorp, Inc.’s (NASDAQ:EWBC) EPS is expected to rise by 16%, while its one-year dividend growth rate currently stands at 20.7%.
Casey Haire at Jefferies holds a ‘Buy’ rating on East West Bancorp, Inc. (NASDAQ:EWBC) shares as of July 11. The analyst also holds a $79 price target on the stock.
Aristotle Capital Management, an independent/employee-owned investment management organization, mentioned East West Bancorp, Inc. (NASDAQ:EWBC) in its first quarter 2022 investor letter. Here’s what the firm said:
“We purchased East West Bancorp in the third quarter of 2017; however, our history with the business stretches back further having twice previously invested. Companies we consider to be high-quality like East West tend to remain high quality, and we have long admired the business for its uniqueness among the otherwise homogenous U.S. banking industry. Its dominant market share built over generations in Asian communities – and difficult-to-replicate experience due to culture, geography and business practices – create distinct competitive advantages in our view. During our most recent holding period, the bank achieved sustained loan growth, a catalyst we identified, through its continued leadership position as the financial “bridge” for customers doing business in the U.S. and China. Moreover, East West also realized market share gains in its headquarters state of California. With these catalysts nearing completion, we decided to exit our investment to fund the purchase of Oshkosh. As always, we will continue to study East West and, in the future, may once again find an opportunity to be investors.”
9. KeyCorp (NYSE:KEY)
Number of Hedge Fund Holders: 37
KeyCorp (NYSE:KEY) is the holding company for the KeyBank National Association, responsible for providing retail and commercial banking products and services in the U.S. The company operates through its Consumer Bank and Commercial Bank segments.
On July 12, analyst Betsy Graseck at Morgan Stanley placed a $21 price target on KeyCorp (NYSE:KEY) shares. Graseck also holds an ‘Equal Weight’ rating on the shares.
Like other banks, KeyCorp (NYSE:KEY) benefited when the Federal Reserve raised interest rates. The company’s second-quarter net interest income came in at $1.1 billion, higher than the $1 billion figure in the first quarter. Its noninterest income of $688 million was also higher than the $676 million figure in the previous quarter.
Out of the 895 hedge funds tracked by Insider Monkey that filed 13Fs for the second quarter, 37 were long KeyCorp (NYSE:KEY), with their total stake value being $338 million.
8. M&T Bank Corporation (NYSE:MTB)
Number of Hedge Fund Holders: 39
M&T Bank Corporation (NYSE:MTB), a bank holding company, provides commercial and retail banking services. The company offers deposit, lending, cash management, and other financial services to small businesses and other customers.
The company’s diluted EPS in the second quarter was $1.08, falling well short of the previous quarter’s EPS of $2.62. Its revenue was $1.68 billion, also beating the previous quarter’s revenue of $1.44 billion. M&T Bank Corporation (NYSE:MTB) expects EPS growth of about 25% over the next three to five years, and it currently holds a one-year dividend growth rate of 6.8%.
Morgan Stanley analyst Betsy Graseck reiterated an ‘Overweight’ rating on M&T Bank Corporation (NYSE:MTB) shares on July 21. The analyst also raised her price target on the stock from $203 to $222.
M&T Bank Corporation (NYSE:MTB) was held by 39 hedge funds at the end of the second quarter, compared to 40 hedge funds in the previous quarter. Their total stake values were $1 billion and $1.1 billion respectively.
M&T Bank Corporation (NYSE:MTB) is a company that has been steadily rising to join the ranks of renowned financial institutions like JPMorgan Chase & Co. (NYSE:JPM), Morgan Stanley (NYSE:MS), and Goldman Sachs Group, Inc. (NYSE:GS) in popularity among the smart money.
7. U.S. Bancorp (NYSE:USB)
Number of Hedge Fund Holders: 43
U.S. Bancorp (NYSE:USB) is a financial services holding company. It provides financial services to individuals, businesses, institutional organizations, governmental entities, and other financial institutions in the U.S.
An ‘Equal Weight’ rating was reiterated on U.S. Bancorp (NYSE:USB) shares on July 12 by Morgan Stanley’s Betsy Graseck. The analyst also holds a $54 price target on the stock.
U.S. Bancorp (NYSE:USB) benefitted from rising interest rates, loan growth, and fee revenue in the second quarter, allowing it to deliver strong results. The company’s second-quarter net interest income on a taxable equivalent basis rose from $3.2 billion in the first quarter to $3.5 billion in the second quarter. Its net interest margin was pushed up to 2.6% in the second quarter, from 2.4% in the first quarter.
Our hedge fund data shows 43 funds long U.S. Bancorp (NYSE:USB) in the second quarter, with a total stake value of $6.5 billion. Berkshire Hathaway was the largest stakeholder in the company, holding 120 million shares worth $5.5 billion.
ClearBridge Investments, an investment management firm, mentioned U.S. Bancorp (NYSE:USB) in its fourth quarter 2021 investor letter. Here’s what the firm said:
“Over the last year, we have repositioned our portfolio to navigate the course we see ahead. We have increased our exposure to interest-rate sensitive banks by adding to existing positions in U.S. Bancorp.”
6. Morgan Stanley (NYSE:MS)
Number of Hedge Fund Holders: 58
Morgan Stanley (NYSE:MS) is an investment banking and brokerage company. It provides a range of financial products and services to corporations, governments, financial institutions, and individuals. Oppenheimer’s Chris Kotowski holds an ‘Outperform’ rating on Morgan Stanley (NYSE:MS) shares as of July 15. The analyst also holds a $95 price target on the stock.
Morgan Stanley (NYSE:MS) had a five-year average annualized return of 14.6% as of this August, and a 10-year average annualized return of 21.4%. The company’s EPS is expected to rise by 3% over the next three to five years, and it has a one-year dividend growth rate of 64.3% at present.
As of the close of the second quarter, 58 hedge funds were long Morgan Stanley (NYSE:MS), compared to 61 hedge funds in the previous quarter. Their total stake values were $2.9 billion and $3.3 billion respectively.
Sound Shore Management, an investment management firm, mentioned Morgan Stanley (NYSE:MS) in its second quarter 2022 investor letter. Here’s what the firm said:
“Morgan Stanley (NYSE:MS) is a long term holding, retreated despite having business models that are more resilient, over-capitalized and underappreciated by the market. In June, the Federal Reserve’s stress tests again blessed the health of the overall banking system. Morgan Stanley stood out with an 11% increase in its annual dividend, yielding 4.1% at quarter’s end.”
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Disclosure: None. 12 Best Bank Stocks to Buy Now is originally published on Insider Monkey.
