In this article, we will look at the 9 best European bank stocks to buy now.
Back in 2014, the European Central Bank started experimenting with negative interest rates. Initially, the ECB started by bringing its deposit rate down to negative 0.1% in the middle of 2014 and eventually brought it to negative 0.5% in September 2020 to encourage investment-related activities and lending in the region. This did not play out as European policymakers anticipated since, during the course of negative interest rates, European economies registered slow GDP growth, and in some cases, no GDP growth as pointed out by CME Group.
Inflation in Europe
According to Eurostat, annual inflation in Europe recorded a year-over-year increase of 8.6% in June 2022, up from 8.1% in May 2022. Energy prices rose 41.9% year over year in June, up from 39.1% in May. Food, inclusive of alcohol and tobacco products, registered an 8.9% rise year over year in June, up from 7.5% in May 2022. Non-energy industrial goods recorded a 4.3% year-over-year increase, up from 4.2% in May 2022. As major US banks like Bank of America Corporation (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM), and Morgan Stanley (NYSE:MS) are gaining traction in the rising interest rate environment, European banks are also well-positioned to profit from tightening monetary policies.
Negative Interest Rates To End
Now in 2022, the ECB is set to end its 8-year-long experiment with negative interest rates in an effort to regulate skyrocketing inflation in Europe. This is good news for European banks, as they will be the beneficiaries of rising interest rates and are expected to experience an increase in lending revenue. Bloomberg compiled analyst estimates and found that Europe’s 10-biggest listed banks will see their collective net interest income rise to 144.6 billion euros, or $155 billion in 2022. Among the most anticipated gainers are Banco Santander (NYSE:SAN) and Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA), who will benefit from their focus on floating-rate loans. Deutsche Bank AG (NYSE:DB) is expected to experience profits from rising interest rates but at a slower rate than its European rivals due to its focus on deposits.
Photo by Mirza Babic on Unsplash
Our Methodology
To determine the 9 best European bank stocks to buy now, we reviewed European banks and did our research on them. Our primary indicators to shortlist the best European bank stocks were analyst and investor sentiment. We narrowed down our selection to stocks that had consensus buy-side ratings from expert analysts and positive investor sentiment. We also preferred including bank stocks that were offering higher dividend yields as compared to their rivals.
Best European Bank Stocks to Buy Now
9. BNP Paribas SA (OTC:BNPQY)
Number of Hedge Fund Holders: N/A
BNP Paribas SA (OTC:BNPQY) provides a range of banking and financial services in Europe, North America, the Asia Pacific, and internationally. Analysts are bullish on French banks. On July 5, Deutsche Bank analyst Kazim Andac upgraded BNP Paribas SA (OTC:BNPQY) to Buy from Hold and reiterated his price target of EUR 66.
Another reason why we included BNP Paribas SA (OTC:BNPQY) in our rankings is because of the stock’s current valuation and dividend yield. As of July 5, BNP Paribas SA (OTC:BNPQY) has a trailing-twelve-month PE ratio of 6.39 and a forward dividend yield of 14.71%, which makes it an undervalued dividend-paying European bank stock to buy now.
Billionaire Ken Fisher is an advocate of diversifying globally, and his hedge fund also happens to be the largest shareholder in BNP Paribas SA (OTC:BNPQY). As of March 31, Fisher Asset Management owns roughly 26.17 million shares of BNP Paribas SA (OTC:BNPQY), which amounts to a stake value of $756.22 million.
Like Banco Santander (NYSE:SAN), Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA), Deutsche Bank AG (NYSE:DB), and HSBC Holdings plc (NYSE:HSBC), BNP Paribas SA (OTC:BNPQY) is one of the best European bank stocks that veteran institutional investors are betting big on.
8. Societe Generale (OTC:SCGLY)
Number of Hedge Fund Holders: N/A
Another French bank that billionaire Ken Fisher is bullish on is Societe Generale (OTC:SCGLY). Societe Generale (OTC:SCGLY) provides financial services to individual, business, and institutional investors in Europe and internationally. As of March 31, Fisher Asset Management is the largest shareholder in the company with stakes worth $0.63 million.
Expert analysts are also bullish on Societe Generale (OTC:SCGLY). On June 1, UBS analyst Jason Napier trimmed his price target on Societe Generale (OTC:SCGLY) to EUR 31 from EUR 34.70 but upgraded the stock to Buy from Neutral. On July 5, Deutsche Bank analyst Kazim Andac trimmed his price target on Societe Generale (OTC:SCGLY) to EUR 33 from EUR 34 but maintained a Buy rating on the shares.
We included Societe Generale (OTC:SCGLY) among our rankings because the stock is currently trading below its intrinsic value and the company is also paying out dividends to investors. As of July 5, Societe Generale (OTC:SCGLY) has a trailing-twelve-month PE ratio of 3.32 and is offering a forward dividend yield of 8.06%, factors that make it a value dividend European bank stock to buy now.
Analysts and institutional investors are bullish on Societe Generale (OTC:SCGLY), and the stock is presenting an attractive entry point for investors looking to gain exposure to European markets. Other European bank stocks that are a “Buy” right now include Banco Santander (NYSE:SAN), Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA), Deutsche Bank AG (NYSE:DB), and HSBC Holdings plc (NYSE:HSBC).
7. Lloyds Banking Group PLC (NYSE:LYG)
Number of Hedge Fund Holders: 8
Lloyds Banking Group PLC (NYSE:LYG) is a London-based bank that provides a range of banking and financial services in the United Kingdom. The company operates through three primary segments: Retail, Commercial Banking, and Insurance & Wealth. Analysts are bullish on Lloyds Banking Group PLC (NYSE:LYG). As of April 28, UBS analyst Jason Napier has a 61 GBP price target and a Buy rating on Lloyds Banking Group PLC (NYSE:LYG). Moreover, on May 19, JPMorgan analyst Raul Sinha raised his price target on Lloyds Banking Group PLC (NYSE:LYG) to 61 GBP from 60 GBP and reiterated a buy-side Overweight rating on the shares.
As of July 5, Lloyds Banking Group PLC (NYSE:LYG) has a forward dividend yield of 5.02% and a trailing-twelve-month PE ratio of 5.71, factors that make it a value and dividend-paying stock pick from the European financial services sector.
At the end of Q1 2022, 8 hedge funds held stakes in Lloyds Banking Group PLC (NYSE:LYG) worth $28.05 million. This is compared to 7 hedge funds in the previous quarter with stakes worth $14.78 million. The hedge fund sentiment for the stock is positive.
In the first quarter of 2022, Balyasny Asset Management went long in Lloyds Banking Group PLC (NYSE:LYG) and purchased over 5.75 million shares of the company. Balyasny Asset Management is the largest shareholder in the company and as of March 31, the fund’s stakes in Lloyds Banking Group PLC (NYSE:LYG) are valued at $13.87 million.
European banks and their American counterparts are currently trading at bargain levels, which makes now the optimal time to go long in them. Some of the major banks in the U.S. whose stocks are undervalued right now include Bank of America Corporation (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM), and Morgan Stanley (NYSE:MS).
6. NatWest Group plc (NYSE:NWG)
Number of Hedge Fund Holders: 9
NatWest Group plc (NYSE:NWG) provides banking and financial products and services to personal, commercial, corporate, and institutional customers in the United Kingdom and internationally. The company operates through 5 business segments: Retail Banking, Commercial Banking, Private Banking, RBS International, and NatWest Markets segments.
On June 22, Jefferies analyst Joseph Dickerson raised his price target on NatWest Group plc (NYSE:NWG) to 359 GBP from 246 GBP and upgraded the stock to Buy from Hold.
NatWest Group plc (NYSE:NWG) is undervalued and is also a dividend payer. As of July 5, NatWest Group plc (NYSE:NWG) has a trailing-twelve-month PE ratio of 8.51 and is offering a forward dividend yield of 5.12%.
Hedge funds are piling into NatWest Group plc (NYSE:NWG). At the close of Q1 2022, 9 hedge funds were long NatWest Group plc (NYSE:NWG) with stakes worth $25.94 million. This is compared to 4 positions in the preceding quarter with stakes worth $2.89 million. The hedge fund sentiment for the stock is positive.
As of March 31, Ken Griffin’s Citadel Investment Group is the largest shareholder in NatWest Group plc (NYSE:NWG), with stakes worth $8.69 million. The fund raised its stakes in the European bank by 361% in Q1 2022.
5. UBS Group AG (NYSE:UBS)
Number of Hedge Fund Holders: 12
UBS Group AG (NYSE:UBS) provides financial advice and solutions to private, institutional, and corporate clients worldwide. The company operates through four segments: Global Wealth Management, Personal & Corporate Banking, Asset Management, and Investment Banking. On July 5, JPMorgan analyst Kian Abouhossein trimmed his price target on UBS Group AG (NYSE:UBS) to CHF 20 from CHF 21 but maintained a buy-side Overweight rating on the shares.
As of July 5, UBS Group AG (NYSE:UBS) has a forward dividend yield of 3.10% and a trailing-twelve-month PE ratio of 7.21, two features that justified its inclusion in our list of the 9 best European bank stocks to buy now.
This June, BofA securities listed 50 stocks that the bank sees as well-positioned to gain as the world undergoes major transformative changes, and UBS Group AG (NYSE:UBS) was ranked among their top picks.
Hedge funds are raising their stakes in UBS Group AG (NYSE:UBS). At the close of Q1 2022, 12 hedge funds were bullish on UBS Group AG (NYSE:UBS) with stakes worth $330.79 million. This is compared to 14 positions in the prior quarter with stakes worth $273.33 million.
Pzena Investment Management is the largest shareholder in UBS Group AG (NYSE:UBS). As of March 31, the fund owns over 6.56 million shares of UBS Group AG (NYSE:UBS) which amount to a stake of $128.22 million.
In addition to investing in American bank stocks such as Bank of America Corporation (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM), and Morgan Stanley (NYSE:MS), investors can gain exposure to the European financial services market by investing in European bank stocks such as UBS Group AG (NYSE:UBS).
4. Banco Santander (NYSE:SAN)
Number of Hedge Fund Holders: 15
Banco Santander (NYSE:SAN) is a Spanish bank that provides various retail and commercial banking products and services to individuals, small and medium-sized enterprises, and large companies worldwide. On June 28, Morgan Stanley analyst Alvaro Serrano raised his price target on Banco Santander (NYSE:SAN) to EUR 4.30 from EUR 4.20 and maintained an Equal Weight rating on the shares.
As of July 5, Banco Santander (NYSE:SAN) has a trailing-twelve-month PE ratio of 5.17 and a forward dividend yield of 3.94%. Banco Santander (NYSE:SAN) is therefore one of the best undervalued and dividend-paying European bank stocks to invest in right now.
At the end of Q1 2022, 15 hedge funds held stakes in Banco Santander (NYSE:SAN) worth $592.72 million. This is compared to 13 hedge funds in Q4 2021 with stakes worth $508.48 million. The hedge fund sentiment for the stock is positive.
As of March 31, Ariel Investments owns over 1 million shares of Banco Santander (NYSE:SAN) which amount to a stake of $23.24 million. Arial Investments is the largest shareholder in the Spanish bank.
3. Deutsche Bank AG (NYSE:DB)
Number of Hedge Fund Holders: 15
Deutsche Bank AG (NYSE:DB) provides investment, financial, and related products and services to private individuals, corporate entities, and institutional clients worldwide. Analysts are bullish on European banks right now. On July 5, JPMorgan analyst Kian Abouhossein slashed his price target on Deutsche Bank AG (NYSE:DB) to EUR 13 from EUR 15 but reiterated a buy-side Overweight rating on the shares.
Deutsche Bank AG (NYSE:DB) as the bank stock appears to be a bargain at current levels and is also offering dividends. As of July 5, Deutsche Bank AG (NYSE:DB) has a forward dividend yield of 2.53% and a trailing-twelve-month PE ratio of 7.72.
Hedge funds are initiating positions in Deutsche Bank AG (NYSE:DB). Insider Monkey found 15 hedge funds bullish on Deutsche Bank AG (NYSE:DB) at the close of Q1 2022. The total stakes of these funds came in at $1.42 billion, down from $1.78 billion a quarter ago with 14 positions.
As of March 31, Hudson Executive Capital is the most bullish hedge fund on Deutsche Bank AG (NYSE:DB), owning over 67.38 million shares of the company. The fund’s stakes in the bank are valued at $858.18 million and the investment covers 68.62% of Hudson Executive Capital’s 13F portfolio.
2. Barclays PLC (NYSE:BCS)
Number of Hedge Fund Holders: 16
Barclays PLC (NYSE:BCS) provides various financial products and services in the United Kingdom, Europe, the Americas, Africa, the Middle East, and Asia. The company operates through two segments: Barclays UK and Barclays International. As of May 24, Credit Suisse analyst Omar Keenan has a 245 GBP price target and a buy-side Outperform rating on the London-based bank.
As of July 5, Barclays PLC (NYSE:BCS) has a trailing-twelve-month PE ratio of 4.30 and a forward yield of 4.32%, two salient features that justified its inclusion among the best European stocks to buy now.
Hedge funds are raising their stakes in Barclays PLC (NYSE:BCS) and the hedge fund sentiment around the stock is positive. At the close of Q1 2022, 16 hedge funds were long Barclays PLC (NYSE:BCS) with stakes worth $121.35 million. This is compared to 11 positions a quarter ago with stakes worth $86.80 million.
In the first quarter of 2022, Masters Capital Management raised its stakes in Barclays PLC (NYSE:BCS) by 25%, bringing them to $39.50 million. As of March 31, Masters Capital Management owns 5 million shares of the bank and is the largest shareholder in the company.
1. HSBC Holdings plc (NYSE:HSBC)
Number of Hedge Fund Holders: 16
HSBC Holdings plc (NYSE:HSBC) provides banking and financial services worldwide. The company operates through 3 business segments: Wealth & Personal Banking, Commercial Banking, and Global Banking & Markets.
Analysts are bullish on HSBC Holdings plc (NYSE:HSBC). On June 15, Investec analyst Ian Gordon upgraded HSBC Holdings plc (NYSE:HSBC) to Buy from Hold and gave the stock a 560 GBP price target. On June 24, Redburn analyst Fahed Kunwar upgraded HSBC Holdings plc (NYSE:HSBC) to Buy from Neutral.
Apart from positive analyst sentiment, HSBC Holdings plc (NYSE:HSBC) is currently trading at bargain levels and is also awarding its shareholders with dividends, which makes it rank high among the best European bank stocks to buy now. As of July 5, HSBC Holdings plc (NYSE:HSBC) has a forward dividend yield of 3.82% and a trailing-twelve-month PE ratio of 11.09.
Institutional investors are bullish on HSBC Holdings plc (NYSE:HSBC). Insider Monkey found 16 hedge funds bullish on HSBC Holdings plc (NYSE:HSBC) at the close of Q1 2022. These funds held collective stakes worth $221.62 million in the company, up from $150.19 million in the prior quarter with 10 positions. The hedge fund sentiment for the stock is positive.
As of March 31, Jim Simons’ Renaissance Technologies is the most bullish hedge fund on HSBC Holdings plc (NYSE:HSBC). The fund owns over 2.8 million shares of the European bank which amount to a stake of $95.99 million.
You can also take a look at 10 European Defense Stocks to Buy Now and 14 Best European Dividend Stocks To Buy.
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Disclosure: None. 9 Best European Bank Stocks to Buy Now is originally published on Insider Monkey.
