In this article, we will look at the 8 Best European Bank Stocks to Buy According to Hedge Funds.
On May 5, Reuters published a report on the widening competitive gap between European and American investment banks. The report noted that in the fiscal first quarter of 2026, major European banks such as BNP Paribas, Deutsche Bank, and others posted flat or declining investment banking revenues. On the other hand, the US banks, including JPMorgan and Morgan Stanley, achieved record results by capitalizing on market volatility stemming from the Iran war. The report highlighted that UBS was a notable European exception, which delivered a record quarter for its traders.
Reuters pointed out that the disparity between the US and European banks is not new. The US banks have been steadily overtaking European banks’ market share since the 2008 financial crisis. According to the report, this has been driven by faster balance sheet recovery and deeper domestic capital markets.
Moreover, this trend has accelerated under the Trump administration, mainly due to the proposed deregulatory changes to Basel III and GSIB surcharge rules, which are set to lower capital requirements at Wall Street banks by roughly 4.8%. Reuters noted that despite these headwinds, analysts expect European investment banking revenues to grow in 2026, supported by volatile markets and increased dealmaking activity.
With that, let’s take a look at the 8 Best European Bank Stocks to Buy According to Hedge Funds.
To compile the list of 8 Best European Bank Stocks to Buy According to Hedge Funds, we used the Finviz stock screener and Insider Monkey hedge funds database. Using the screener, we aggregated a list of European Banks and ranked them in ascending order of the number of hedge fund holders. We have limited our final selection to companies that have recently reported noteworthy developments likely to impact investor sentiment.
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 498.7% since May 2014, beating its benchmark by 303 percentage points (see more details here).
8 Best European Bank Stocks to Buy According to Hedge Funds
8. Banco Bilbao Vizcaya Argentaria, S.A. (NYSE:BBVA)
Number of Hedge Fund Holders: 12
Banco Bilbao Vizcaya Argentaria, S.A. (NYSE:BBVA) is one of the Best European Bank Stocks to Buy According to Hedge Funds. On May 15, J.P. Morgan lowered the price target on Banco Bilbao Vizcaya Argentaria, S.A. (NYSE:BBVA) from EUR 23.6 to EUR 23.4, while maintaining an Overweight rating on the shares.
In separate news on May 13, Fitch Ratings upgraded the BBVA’s long-term issuer rating to A from A- and also improved the long-term deposit rating to A+ from A. The rating firm also maintained a stable outlook on the bank. The improvement follows Fitch Rating’s recent review of its rating methodology and also indicates an improvement in the bank’s perceived credit quality.
In the recent fiscal Q1 2026 earnings, the bank topped expectations with a 10.8% year-over-year increase in profit to 2.99 billion Euros. This was supported by a 17.8% year-over-year increase in net interest income to 7.54 billion, which also topped the consensus of 7.23 billion. Management noted that the bank’s strong performance in Spain and Mexico helped offset uncertainties from the Iran war.
Banco Bilbao Vizcaya Argentaria, S.A. (NYSE:BBVA) is a leading Spanish multinational financial services group founded in 1857. Headquartered in Bilbao, with operating headquarters in Madrid, the bank provides retail, corporate, and investment banking services with a strong digital focus across Spain, Mexico, Turkey, and South America.
7. Lloyds Banking Group plc (NYSE:LYG)
Number of Hedge Fund Holders: 16
Lloyds Banking Group plc (NYSE:LYG) is one of the Best European Bank Stocks to Buy According to Hedge Funds. Recently, on April 30, Lloyds Banking Group plc (NYSE:LYG) was reiterated by Citi analyst Andrew Coombs with a Buy rating. The analyst also raised the price target from 114 GBp to 123 GBp.
The rating follows the bank’s fiscal Q1 2026 earnings reported on April 29. During the quarter, the bank reported a better-than-expected rise in profit of around 33%, along with an increase in lending income. The statutory profit before tax for the first quarter came in at 2 billion pounds, up significantly from 1.52 billion pounds a year ago. This was above the consensus estimate of 1.84 billion pounds.
According to a Reuters report, Lloyds Banking Group flagged concerns that the ongoing conflict in the Middle East could weigh on Britain’s economy, slow global growth, and push unemployment higher. Chief Financial Officer William Chalmers indicated the bank is working under the assumption that hostilities will gradually ease throughout the year. As a precaution, Lloyds set aside a small financial provision to account for the potential economic impact of that scenario.
Management elaborated that this provision falls under post-2008 financial crisis accounting rules, which require banks to anticipate and recognize a share of expected loan losses ahead of time, based on market conditions.
Despite this charge, its impact on Lloyds’ overall finances remained minimal. Against its 486 billion pound loan book, the provision was negligible, and profits were unaffected as the bank grew its assets while cutting operating costs by 3%. Lloyds confirmed it remains on track to meet its annual performance targets, including achieving a return on tangible equity exceeding 16% in 2026.
Lloyds Banking Group PLC (NYSE:LYG) is a leading UK-based financial services group. It provides a broad range of banking and financial services to retail and commercial customers. The group includes household brands such as Lloyds Bank, Halifax, Bank of Scotland, and Scottish Widows.
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