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.
Our Methodology
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. 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.
6. Banco Santander, S.A. (NYSE:SAN)
Number of Hedge Fund Holders: 18
Banco Santander, S.A. (NYSE:SAN) is one of the Best European Bank Stocks to Buy According to Hedge Funds. On May 12, RBC Capital raised its price target on Banco Santander, S.A. (NYSE:SAN) from EUR 12.5 to EUR 12.75 and maintained an Outperform rating on the shares.
The rating follows Banco Santander’s fiscal Q1 2026 earnings reported on April 29. The bank posted record first-quarter net profits of 3.56 billion euros, reflecting 12.5% increase year-over-year. This was driven by strong performances in Spain and Mexico. Management noted that taking into account the capital gains, total net profit surged 60% to 5.46 billion euros. The bank also reaffirmed its 2026 to 2028 targets, including mid-single-digit revenue growth and a capital ratio of 12.8% to 13%.
According to a report by Reuters, growth for the quarter was broad-based across most markets. The profit growth was mainly led by a 12% increase in Spain, driven by rising lending and a healthy economy. Moreover, while Mexico and Brazil also posted gains, it was offset by Portugal and Argentina. The profits in Argentina dropped 60% due to worsening economic conditions.
Banco Santander is a Spain-based company that operates as a retail and commercial bank. Its segments are scattered across Continental Europe, the United Kingdom, Latin America, and the United States.
5. NatWest Group plc (NYSE:NWG)
Number of Hedge Fund Holders: 20
NatWest Group plc (NYSE:NWG) is one of the Best European Bank Stocks to Buy According to Hedge Funds. On May 11, NatWest Group plc (NYSE:NWG) was upgraded at BNP Paribas by analyst Guy Stebbings from Neutral to Outperform. The analyst has set a price target of $18.2 on the stock.
The rating comes after the company reported fiscal Q1 2026 results on May 1. The bank reported a 12% year-over-year increase in first-quarter profits before tax. The operating profit reached 2 billion pounds and came in ahead of the analyst consensus of 1.9 billion pounds. Management highlighted that results were driven by growth in lending income.
The results show that NatWest Group, like its peer Lloyds Banking Group plc (NYSE:LYG) has shown continued profitability despite geopolitical concerns from the Iran war. The bank also upgraded its full-year income guidance and expects the income to be near the top of its 17.2 billion to 17.6 billion pound range, signaling confidence in its near-term performance despite a more uncertain backdrop.
Reuters reported that the outlook was notably cautious. NatWest sharply revised down its UK economic forecasts and is now expecting GDP growth of just 0.4% for the year, compared to its earlier estimate of 1%, and house price growth of only 0.7% versus a prior forecast of 3.4%. These downgrades reflect rising inflation fears linked to oil price volatility and the ongoing Middle East conflict. The bank also took a 283 million pound impairment charge, with 140 million pounds directly tied to the economic impact of the Iran war.
NatWest Group plc (NYSE:NWG) provides banking and financial services in the United Kingdom and internationally.
4. ING Groep N.V. (NYSE:ING)
Number of Hedge Fund Holders: 21
ING Groep N.V. (NYSE:ING) is one of the Best European Bank Stocks to Buy According to Hedge Funds. On May 13, Deutsche Bank raised the firm’s price target on ING Groep N.V. (NYSE:ING) from EUR 29 to EUR 30, while maintaining a Buy rating on the shares.
The rating follows the company’s fiscal Q1 2026 earnings released on April 30. According to a report by Reuters on the same day, the company’s first-quarter profit came in at 1.56 billion euros, comfortably ahead of analyst forecasts of 1.43 billion euros and roughly 100 million euros higher than the same period last year. The profit growth was driven by a 13% growth in fee income, higher customer trading activity, and a growth of 7% to 4.06 billion euros in commercial net interest income.
Analysts at UBS suggest the commercial net interest income for the bank is expected to pick up again in 2026 and 2027. Looking ahead, ING Groep N.V. confirmed its outlook for this year and next, though CEO Van Rijswijk offered a measured tone on interest rates. While potential rate hikes linked to Iran war inflation risks could boost lending income, he cautioned that gains in commercial income would likely be offset by weaker hedging and treasury results elsewhere.
ING Groep N.V. is a financial services company. It provides banking, investment, and asset management services to individuals, businesses, and institutions. Its offerings include savings and current accounts, mortgages, consumer and business lending, payments, and corporate finance services across retail and wholesale banking segments.
3. Deutsche Bank Aktiengesellschaft (NYSE:DB)
Number of Hedge Fund Holders: 24
Deutsche Bank Aktiengesellschaft (NYSE:DB) is one of the Best European Bank Stocks to Buy According to Hedge Funds. On May 11, Tarik El Mejjad from Bank of America Securities reiterated a Buy rating on Deutsche Bank Aktiengesellschaft (NYSE:DB), with a price target of €38.
The analyst noted that they see improving underlying performance for the bank despite the recent weakness in the share price. The analyst highlighted that recent market volatility and one-off events have overshadowed strong trends in the core business. El Mejjad pointed towards accelerating growth in loans and a notable reduction in the normalized cost of risk.
That said, the company during its fiscal first quarter of 2026 reported record net profit of 1.912 billion euros. This comes despite the company setting aside 90 million euros for the impact of the Iran war and depressed revenue at its global investment bank due to a weaker dollar.
Deutsche Bank Aktiengesellschaft was also recently included in our list of the 10 Best Global Stocks to Buy According to Wall Street Analysts.
2. Barclays PLC (NYSE:BCS)
Number of Hedge Fund Holders: 29
Barclays PLC (NYSE:BCS) is one of the Best European Bank Stocks to Buy According to Hedge Funds. On May 6, Jefferies reiterated a Buy rating on Barclays PLC (NYSE:BCS) with a price target of p590.
The rating comes after the company on April 28 posted fiscal first quarter 2026 results. According to a report by Reuters published on the same day, the bank posted profit before tax of 2.8 billion pounds, slightly up from £2.7 billion the year prior, broadly meeting analyst expectations. However, the results were overshadowed by two notable charges, including a 228 million pound provision tied to the collapse of MFS, a London-based property lender, and an additional 100 million pound set aside for compensation related to a UK car finance mis-selling scandal.
The report also highlighted that the bank’s share buyback of 500 million pounds also disappointed, falling short of the 614 million pounds that analysts had anticipated. On the bright side, the investment bank performed solidly with income rising 4% year-on-year to 4 billion pounds, slightly ahead of forecasts. Moreover, the equities trading revenue surged 23%, and fixed income rose by 8%.
Despite this, Barclays lagged behind its Wall Street peers across most metrics. CEO C.S. Venkatakrishnan acknowledged the widening competitive gap created by US deregulation under President Trump; the CEO warned of growing “competitive friction” that European banks must work harder to overcome.
Headquartered in London, Barclays PLC is a bank holding company that provides credit cards, retail banking, wealth management, and corporate and investment banking services.
1. UBS Group AG (NYSE:UBS)
Number of Hedge Fund Holders: 39
UBS Group AG (NYSE:UBS) is one of the Best European Bank Stocks to Buy According to Hedge Funds. On May 13, Deutsche Bank analyst Benjamin Goy raised its price target on UBS Group AG (NYSE:UBS) from CHF 39 to CHF 40 and maintained a Buy rating on the shares.
Deutsche Bank’s rating comes after UBS announced fiscal Q1 2026 earnings on April 29. During the quarter, the bank posted $3.0 billion in net profits, representing 80% year-over-year growth and beating the average estimate of $2.3 billion. Management noted the standout drivers to be record trading revenue in its investment banking division, where income surged 27%, driven by market turbulence linked to the Iran war. Moreover, global wealth management added $37 billion in net new assets, with a notable $5.3 billion inflow from the Americas reversing prior-quarter outflows in that key growth market.
A recent report by Reuters highlighted that despite strong results, the attention has shifted towards regulatory pressures from Switzerland’s newly proposed banking bill, which could require UBS to raise an additional $20 billion in core capital.
The report noted that while UBS Group AG has reaffirmed its commitment to at least $3 billion in share buybacks for 2026, CEO Sergio Ermotti cautioned that second-half buyback ambitions hinge on greater clarity from parliament on capital rules.
UBS Group AG is a global financial institution that provides wealth management, personal and corporate banking, asset management, and investment banking services to private, institutional, and corporate clients worldwide.
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