In this article, we will look at the 7 Cheap Bank Stocks To Invest In Before They Take Off.
Banking Sector Outlook 2025
On December 10 Fidelity Investment released its banking sector outlook for 2025, highlighting tailwinds for the sector which can result in positive momentum for the year. According to Matt Reed, the Fidelity Sector Portfolio Manager, the financial sector experienced significant growth in 2024. The industry is reported to have increased by over 30% as of mid-December, outperforming the broader S&P 500 index by 5 percentage points. As per the analysts, the surge was driven by the post-election boost and improved economic conditions. Reed highlighted that despite the concerns such as the collapse of several small-to-mid-sized banks at the beginning of 2024. The market perceived these issues as isolated rather than a wider crisis, thereby allowing the economic strength to overshadow these challenges quicker than anticipated.
Matt Reeds noted that the financial sector is expected to remain on solid ground in 2025, driven by steady US economic growth. The cyclical nature of financial stocks means their performance is closely linked to the broader economy, which is showing signs of resilience and a potential soft landing. Fidelity Investment identified that larger institutions are expected to potentially recover from past regulatory issues and capitalize on improved market conditions. Moreover, regional banks with strong credit quality and strategic acquisitions are also expected to increase their market shares. Lastly, payment processing companies and financial technology companies are also expected to thrive due to their sensitivity to economic activity and consumer spending patterns.
The report highlighted that while the outlook is optimistic there are some inherent risks including further interest rate cuts, which could compress net interest margins for banks, impacting profitability. In addition, some banks may face challenges related to their commercial real estate holdings if economic conditions worsen, leading to weaker loan demand and increased nonperforming loans.
With that let’s take a look at the 7 cheap bank stocks to invest in before they take off.
A financial advisor in a suit, pen in hand, talking to a client in the bank.
Our Methodology
To compile the list of 7 cheap bank stocks to invest in before they take off, we used the Finviz stock screener, Seeking Alpha, and Yahoo Finance. Using the screener we aggregated an initial list of bank stocks trading under a Forward P/E of 15 with positive earnings growth and analyst upside potential of at least 25%. Next, we cross-checked the Forward P/E for each stock from Seeking Alpha, earnings growth from Yahoo Finance, and analyst upside potential from CNN. Lastly, we ranked the stocks in ascending order of the analyst upside potential. Please note that the data was collected on January 31, 2025.
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7 Cheap Bank Stocks To Invest In Before They Take Off
7. Itaú Unibanco Holding S.A. (NYSE:ITUB)
Earnings Growth: 6.36%
Forward P/E Ratio: 7.72
Analyst Upside Potential: 29.31%
Itaú Unibanco Holding S.A. (NYSE:ITUB) is a major financial institution based in Brazil that offers a range of banking and financial services to individuals and businesses. The bank has a presence in 18 countries around the globe and is renowned for its Phygital. The Phygital model combines physical and digital modes of services to provide clients with a wholesome banking experience.
On January 17, Thiago Batista, an analyst at UBS, upgraded Itaú Unibanco Holding S.A. (NYSE:ITUB) from a Neutral rating to a Buy rating, however, reduced the price target from R$42 to R$41. Batista noted that the current valuation of the bank is attractive for a premium Brazilian Bank. Moreover, the firm expects the bank to post decent profitability with a double-digit dividend yield.
Financially speaking, Itaú Unibanco Holding S.A. (NYSE:ITUB) grew its recurring managerial results by 19.4% year-over-year to reach R$10.7 billion for the fiscal third quarter of 2024. On the other hand, the credit portfolio also grew by 9.9% during the same time. Management during the earnings call noted that their ability to innovate and adapt has allowed the bank to become one of the largest banks in Latin America. It is one of the cheap bank stocks to invest in before they take off.
6. Woori Financial Group Inc. (NYSE:WF)
Earnings Growth: 303.17%
Forward P/E Ratio: 3.8
Analyst Upside Potential: 30.47%
Woori Financial Group Inc. (NYSE:WF) is a financial holding company based in South Korea. It provides various financial services including banking, financial technology, research and analysis, credit, and investment. The group provides banking services through its primary subsidiary Woori Bank, which offers traditional banking services such as accepting deposits, providing loans, and facilitating foreign currency exchanges.
During the fiscal third quarter of 2024, Woori Financial Group Inc. (NYSE:WF) posted robust growth. Its cumulative net income of KRW 2.6591 trillion grew 9.1% year-over-year and surpassed last year’s total by about KRW 150 billion within just three quarters. During the third quarter alone the group posted KRW 903.6 billion in net income and exceeded market expectations of KRW 900 billion for the second consecutive quarter. Management noted that the group performed well despite challenges such as margin contraction due to falling market interest rates.
Woori Financial Group Inc. (NYSE:WF) is actively working to enhance its non-bank business operations and diversify its income sources. For instance, in August 2024, the group merged Woori Investment Bank and F&I Securities to create a new entity called Woori Investment Securities. Moreover, it also signed a Framework Partnership Agreement (FPA) with Toon Yang and ABL Insurance, laying the groundwork for entering the insurance industry. It is one of the cheap bank stocks to invest in before they take off.
5. KB Financial Group Inc. (NYSE:KB)
Earnings Growth: 178.28%
Forward P/E Ratio: 6.69
Analyst Upside Potential: 33.37%
KB Financial Group Inc. (NYSE:KB) is one of the largest financial services companies based in South Korea. It provides a range of banking services and financial products through its subsidiaries. The group operates Kookmin Bank, which leads its banking services, providing personal and corporate loans, deposits, and investment options to individuals and businesses. The group operates internationally with a presence in Indonesia, Cambodia, and the United States, among others.
On December 12, Morgan Stanley’s analyst Joon Seok upgraded KB Financial Group Inc. (NYSE:KB) from Equal Weight to Overweight and also raised the price target from KRW 94,000 to KRW 105,000. The analyst has placed KB as one of the top picks among the South Korean financial stocks. Moreover, in its fourth quarter 2024 investor letter, Oakmark International Fund expressed a positive outlook on KB Financial Group Inc. (NYSE:KB).
The fund noted that Korean banks generally have struggled with low returns on equity and payout ratios, however, the government’s “value up” program aimed at improving corporate governance and capital efficiency could benefit banks like KB Financial. Oakmark recognized the bank to have a robust capital position and as a low-cost deposit franchise. Here’s what the fund said about the bank:
“KB Financial Group Inc. (NYSE:KB) is a leading South Korean bank that provides a range of financial products and services, including retail banking, corporate banking, wealth management, and international banking services. Korean banks have a history of generating uninspiring returns on equity and low payout ratios (POR), and despite recent geopolitical uncertainty, there is broad support for the government’s value-up program, which aims to address these issues by encouraging better corporate governance, transparency, and improved capital efficiency. As South Korea’s largest bank, KB Financial possesses the industry’s strongest capital position, a renowned low cost deposit franchise and leading fee income, which we believe advantageously positions the company to lead the now improving banking industry in both the speed and magnitude of improvements to POR. In addition, we appreciate management’s focus on shareholder return because the anticipated growth in dividends and buybacks provides downside protection if the multiple expansion portion of the thesis sputters. Despite this compelling set-up, we were excited to purchase shares at an attractive valuation for a bank commonly acknowledged as the best bank in South Korea, per our channel checks.”
4. Inter & Co, Inc. (NASDAQ:INTR)
Earnings Growth: 37.43%
Forward P/E Ratio: 14.55
Analyst Upside Potential: 34.26%
Inter & Co, Inc. (NASDAQ:INTR) is a Brazilian company that has created a global payments platform designed to simplify financial transactions for both individuals and businesses. The company originally started as a traditional bank, however, it has transitioned to become a digital multi-service bank through its super app. The app allows users to access various traditional banking services online along with online shopping, travel booking, and investment management.
The super app has become one of its differentiating factors as the company has successfully attracted more than 35 million clients resulting in around 15 million logins per day. During the fiscal third quarter of 2024, Inter & Co, Inc. (NASDAQ:INTR) reported a 74% growth in foreign exchange transactions, which is significantly higher than the market average. In addition, management has been continuously improving the platform. For instance, an AI-powered Inter Shop Concierge is launching soon which will enhance e-commerce traffic and monetization.
Inter & Co, Inc. (NASDAQ:INTR) executing a strategic framework known as the 60/30/30 plan, which focuses on enhancing market share, product penetration, and operational efficiency. On January 16, Morgan Stanley raised the price target from $4 to $4.50, while keeping an Underweight rating on the stock. The firm noted that the company’s 5-year plan presents a significant upside, however, they remain skeptical regarding management’s ability to deliver the plan. It is one of the cheap bank stocks to invest in before they take off.
3. Dime Community Bancshares, Inc. (NASDAQ:DCOM)
Earnings Growth: 58.42%
Forward P/E Ratio: 10.99
Analyst Upside Potential: 34.49%
Dime Community Bancshares, Inc. (NASDAQ:DCOM) is a bank holding company that primarily operates through its subsidiary, Dime Community Bank. The bank provides a range of services including deposits, loans, investment services, and retirement accounts. It operates 60 branch locations primarily in Long Island and New York City, making it accessible to a large number of customers in these areas.
Dime Community Bancshares, Inc. (NASDAQ:DCOM) achieved significant growth in 2024 as highlighted during its fiscal fourth quarter 2024 earnings call. The company started the year by hiring deposit-gathering teams from the former Signature Bank, which proved to be successful. These teams helped raise approximately $1.8 billion in core deposits, with about 40% being non-interest-bearing deposits. Moreover, the bank also opened over 11,000 new accounts and established 7,000 individual customer relationships, indicating strong market penetration.
On January 27, M. Navas, an analyst at DA Davidson, kept a Buy rating on the stock. The analyst anticipates savings and loan companies will earn $3.90 per share for the year, up from their prior estimate of $3.00. Dime Community Bancshares, Inc. (NASDAQ:DCOM) is one of the cheap bank stocks to invest in before they take off.
2. Shinhan Financial Group Co., Ltd. (NYSE:SHG)
Earnings Growth: 1.87%
Forward P/E Ratio: 5.61
Analyst Upside Potential: 48.04%
Shinhan Financial Group Co Ltd. (NYSE:SHG) is a major financial services company based in South Korea. It is recognized as one of the largest financial conglomerates in the country. The group provides a range of services including banking, credit cards, investment, and insurance services.
The group recently faced challenges, particularly due to significant losses incurred by its securities division. It reported a loss of KRW 135.7 billion in the third quarter of 2024 due to issues related to trading operations at Shinhan Securities, specifically involving futures contracts that were not aligned with their hedging strategies. Management noted that they are actively working to diagnose the root causes of the losses and improve oversight.
Looking ahead, Shinhan Financial Group Co Ltd. (NYSE:SHG) is focused on improving qualitative growth through Return on Equity and Return on Assets. The company aims for an ROE of 13% by 2025, which involves optimizing how it allocates its assets and resources. This strategy includes prioritizing high-growth areas such as corporate lending and digital banking, while also working on improving operational efficiency and reducing costs to achieve these targets. It is one of the cheap bank stocks to invest in before they take off.
Polaris Global Equity Strategy stated the following regarding Shinhan Financial Group Co., Ltd. (NYSE:SHG) in its Q3 2024 investor letter:
“On the backdrop of interest rate cuts, financials shined on expectations for loan demand and cheaper cost of capital; in fact, all sector holdings were in absolute positive territory. Shinhan Financial Group Co., Ltd. (NYSE:SHG) was the top contributor, with a second-quarter earnings beat on better non-interest income with credit costs under control. An enhanced shareholder return policy was a pleasant upside surprise, as Shinhan committed to returning 50% of earnings to investors through dividends and share buybacks by 2027.”
1. Banco Bradesco S.A. (NYSE:BBD)
Earnings Growth: 8.16%
Forward P/E Ratio: 6.64
Analyst Upside Potential: 113.27%
Banco Bradesco S.A. (NYSE:BBD) operates as a prominent Brazilian bank that provides a range of financial services. It operates as a full-service commercial bank, meaning it offers all services including checking and savings accounts, loans for individuals and businesses, and credit cards. The bank has been focused on improving its digital services during the fiscal third quarter of 2024, it closed down some of its physical branches to allocate more resources to its digital transformation venture.
On January 13, HSBC upgraded the stock from Neutral to a Buy rating, however, reduced the price target from $3.10 to $2.80. During the fiscal third quarter of 2024, Banco Bradesco S.A. (NYSE:BBD) generated R$30.6 billion in revenue, up 3.7% on a subsequent basis. Moreover, the bank also grew its total loan book, which reached R$944 billion after growing 3.5% quarter-over-quarter. Management has been focused on expanding its lending across various clients, for instance, its lending to individuals grew 10%, lending to SMEs grew 17%, and lending to large corporations witnessed a 0.7% growth. Banco Bradesco S.A. (NYSE:BBD) is the cheapest bank stock to invest in before it takes off.
While we acknowledge the potential of Banco Bradesco S.A. (NYSE:BBD) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BBD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
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