This article discusses the 10 best bank penny stocks to buy according to hedge funds.
2024 was another strong year for US banking giants. According to a report by the Financial Times, the four biggest banks in the country are on course to grab their largest share of the industry since 2015. As of September 2024, they collectively reported around $88 billion in profits during the first nine months of the year, representing 44% of the American banking industry’s profits.
In further encouraging signs for the industry, Moody’s in December upgraded the global banking industry from negative to stable for the first time since 2023. It cited monetary adjustments and interest rate cuts among G-20 countries as reasons behind the upgrade. The credit rating agency expects these measures to improve asset quality and liquidity in the banking system.
READ ALSO: 10 Best Bank Stocks With High Dividends and 10 Best Bank Stocks To Invest In For the Long Term.
The Federal Reserve on December 18 announced a further quarter-point cut, reducing the central bank’s target interest rate to between 4.25% and 4.5%. This was the third cut for the year. The Feds also projected two more cuts for 2025. While higher interest rates generally allow banks to earn more, they can dry up the demand for more loans when they remain high for too long.
Moreover, Donald Trump’s victory in the presidential elections has also raised hopes of lax regulations in the financial sector amid growing concerns about antitrust scrutiny and capital requirements slowing down investment banking and lending revenues. Financial analyst Mike Mayo believes Trump’s win will be a ‘regulatory game changer’ with reduced oversight and a freer market, benefiting banks by driving revenues and loan growth. A more business-friendly environment is also likely to boost banks’ bottom line.
However, some analysts also warn of the risks of ongoing geopolitical conflicts in Europe and the Middle East, which are resulting in uncertainty around the outlook of the global economy. Val Srinivas, Senior Research Leader at Deloitte, made the following remarks in the firm’s annual banking outlook positions for 2025:
“Bank executives will welcome 2025 with mixed emotions. While inflationary pressures have subsided and interest rates are dropping, subpar economic growth and continuing geopolitical shocks will likely give bank CEOs anxiety.”
Increasing trade tensions between the United States and China, with growing protectionist policies can also hurt investment flows in 2025. Following his election victory, Trump has vowed to impose steep tariffs on imports from Canada, China, and Mexico, which could increase costs for manufacturers.
Last month, in a post on his Truth Social platform, the President-elect threatened the European Union (EU) with tariffs if it does not buy more oil and gas from the US. The spokesperson for the 27-nation bloc, which already relies on Washington for most of its energy needs, stated that the EU was open to negotiations.
With that said, let’s now shift focus and look at the 10 best bank penny stocks to buy according to hedge funds.
An exterior view of a modern banking building, showcasing its financial stability and reach.
Methodology
We sifted through screeners to identify stocks in the banking sector that had a share price of under $5 as of the close of day on Friday, January 3, 2025. From there, we selected the 10 stocks with the highest number of hedge fund investors, based on Insider Monkey’s database of over 900 prominent hedge funds as of Q3 2024.
The 10 best bank penny stocks have been ranked in ascending order based on the number of hedge funds holding stakes in them. Where two or more stocks were tied on hedge fund sentiment, we used a higher market cap as a tiebreaker between them.
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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Bank Penny Stocks to Buy According to Hedge Funds
10. Sterling Bancorp, Inc. (Southfield, MI) (NASDAQ:SBT)
Share Price as of the close of January 3: $4.76
Number of Hedge Fund Holders: 4
Sterling Bancorp, Inc. (Southfield, MI) (NASDAQ:SBT) is a unitary thrift holding company for the Sterling Bank and Trust, F.S.B., which provides community banking services for individuals and businesses. It operates a network of 27 branches, of which a majority are located in the San Francisco and Los Angeles metropolitan areas.
In September, the company announced that it would be selling Sterling Bank and Trust, F.S.B. to Florida-based EverBank Financial Corp in a definitive stock purchase agreement for $261 million. The board unanimously approved the transaction, which is likely to close during the first quarter of 2025. On December 18, the Bank also received shareholder approval for the planned acquisition. Upon completion of the sale, Sterling Bank would merge with EverBank, with all its branches, except the one in Michigan, becoming EverBank financial centers.
On October 30, Sterling Bancorp, Inc. (Southfield, MI) (NASDAQ:SBT) announced financial results for the third quarter of 2024. It reported a net loss of $143,000 for the quarter. Total assets were valued at $2.4 billion, increasing by 3% sequentially. Cash and due from banks were up 18% from the end of the second quarter to $110.6 million, driven by a growth in deposits and a decline in loans. Total deposits stood at $2.1 billion, increasing by $53.7 million from June 30, 2024.
According to Insider Monkey’s database for Q3 2024, 4 hedge funds had investments in Sterling Bancorp, Inc. (Southfield, MI) (NASDAQ:SBT), up from 3 at the end of the second quarter. SBT finds itself on the tenth spot in our list of the best bank penny stocks to buy according to hedge funds.
9. Inter & Co, Inc. (NASDAQ:INTR)
Share Price as of the close of January 3: $4.00
Number of Hedge Fund Holders: 6
Inter & Co, Inc. (NASDAQ:INTR) is a Brazilian company that operates as a digital multi-service bank, offering individuals and companies various financial services like loans, credits, cards, deposits, investments, and insurance. It is one of the best bank penny stocks to buy according to hedge funds.
The company reported strong results during the third quarter of 2024. Net income soared to a record high of R$260 million, 2.5x higher year-over-year, while the return on equity (ROE) stood at an impressive 11.9%. INTR’s Super App also attracts a growing client base that benefits from new features like personalized services and digital payroll loans. The app had an estimated 35 million clients at the end of Q3.
The NASDAQ-listed firm has navigated the economic and fiscal challenges in Brazil and is now eyeing international expansion beyond its home market. It established its Miami headquarters in 2023 to expand its financial services to Brazilian expatriates while also offering an app experience that is tailored to the American market.
Inter & Co, Inc. (NASDAQ:INTR) has been actively leveraging strategic alliances with expansion in the US firmly on its agenda. For instance, in September 2023, the company entered into multi-year agreements with the Orlando City Soccer Club and Orlando Pride as their official financial institution. Marketing partnerships such as these are helping INTR build awareness and capture market share.
Looking ahead, the fintech company has an ambitious strategic plan, intending to nearly double its client base, and achieve 30% efficiency, and a 30% ROE by 2027. Considering these factors, the overall sentiment around Inter & Co, Inc. (NASDAQ:INTR) is bullish. Wall Street analysts have a consensus Strong Buy rating for INTR, with an average share price upside potential of 62%.
8. Grupo Aval Acciones y Valores S.A. (NYSE:AVAL)
Share Price as of the close of January 3: $2.13
Number of Hedge Fund Holders: 6
Grupo Aval Acciones y Valores S.A. (NYSE:AVAL) is a Colombia-based holding company that primarily engages in the purchase and sale of stocks, bonds, and other securities of companies belonging to the financial sector.
The financial conglomerate operates through four commercial banks in Colombia. These include Banco de Bogota, Banco de Occidente, Banco Popular, and Banco AV Villas. It also owns Corficolombiana, the largest merchant bank in the country, and Porvenir, a major pensions and severance fund manager. The company is also present in Panama through the Banco de Bogotá.
On November 13, Grupo Aval Acciones y Valores S.A. (NYSE:AVAL) announced financial results for the third quarter of 2024. Net income climbed to 415.7 billion Colombian pesos ($94.18 million), growing 103.4% sequentially and 541.4% year-over-year, driven by a high income from investments. Gross loans increased 4.3% from last year, while consolidated deposits also registered an 8.7% growth compared to Q3 2023.
The company launched TAC Aval in October, a feature enabling payment interoperability. A numerical key will be assigned to clients’ savings products in the bank, allowing instant payments between Aval accounts without sharing personal information.
During the first week of January 2025, Grupo Aval Acciones y Valores S.A. (NYSE:AVAL) announced the payment of dividends for the month, following the approval received in the General Shareholders Meeting of March 2024. The decision reinforced the company’s financial stability and its commitment to delivering value to its shareholders.
According to Insider Monkey’s database for Q3 2024, 6 hedge funds held a stake in Grupo Aval Acciones y Valores S.A. (NYSE:AVAL). It is one of the best bank penny stocks to buy according to hedge funds.
7. Banco Santander (Brasil) S.A. (NYSE:BSBR)
Share Price as of the close of January 3: $3.82
Number of Hedge Fund Holders: 7
Banco Santander (Brasil) S.A. (NYSE:BSBR) provides banking products and services to individuals and businesses in Brazil and internationally. It operates through two segments. The retail segment caters to the financial needs of individuals and small and medium-sized enterprises, while the wholesale segment is focused on large corporations and capital markets.
According to Insider Monkey’s database for Q3 2024, 7 hedge funds held a stake in Banco Santander (Brasil) S.A. (NYSE:BSBR), making it one of the best bank penny stocks to buy according to hedge funds. As of September 30, 2024, Marshall Wace LLP is the largest investor in BSBR, with holdings of over $2.9 million.
Several institutional investors have recently added to their stake in the stock. This includes Point72 Asset Management, which lifted its position by 44% during the third quarter of 2024, after buying an additional 54,600 shares. The hedge fund now owns 179,500 shares valued at over $944,000, making it the fifth largest investor in the company.
The company is also eying further expansion in the country. According to a report in Bloomberg, Banco Santander (Brasil) S.A. (NYSE:BSBR) is among the firms that are currently in negotiations to acquire Julius Baer Group Ltd.’s Brazil unit. People familiar with the matter have said that Julius Baer is likely to agree to a joint venture with one of the banks, instead of a total sale, with the expectation of reaching a deal as early as January.
JP Morgan recently upgraded Banco Santander (Brasil) S.A. (NYSE:BSBR)’s rating from Hold to Buy, reflecting bullish sentiment. The analyst also anticipates a 49% uptick in its share price.
6. Blue Ridge Bankshares, Inc. (NYSE:BRBS)
Share Price as of the close of January 3: $3.37
Number of Hedge Fund Holders: 9
Blue Ridge Bankshares, Inc. (NYSE:BRBS) is the holding company of Blue Ridge Bank, the National Association, and the BRB Financial Group, Inc. It operates through the commercial banking and mortgage banking segments.
In April, the company announced the closing of definitive securities purchase agreements for gross proceeds of $150 million in a private placement of its common and preferred stock. BRBS stated that it intends to use the funds to support its short-term strategic initiatives, such as enhancing the bank’s capital levels, repositioning business lines, and spurring organic growth.
On October 29, Blue Ridge Bankshares, Inc. (NYSE:BRBS) announced financial results for the third quarter of 2024, which reflected improvement across various key metrics, such as a growth in deposits, and reductions in non-interest expense and non-performing assets. BSBR also announced that it would exit from fintech banking-as-a-service by the end of 2024.
Net income for the quarter was recorded at $0.9 million, compared to a net loss of $11.4 million in the prior quarter, and a net loss of $41.4 million during the same period last year. Blue Ridge Bankshares, Inc. (NYSE:BRBS)’s total assets increased by 0.34% from the prior quarter to $2.94 billion, driven by higher cash and due from bank balance at the end of the quarter, primarily due to elevated deposit balances of a major lending partner.
The total deposit balance also grew from $2.33 billion at the end of Q2 to $2.35 billion for Q3. Blue Ridge Bankshares, Inc. (NYSE:BRBS)’s liquid assets totaled $805 million, representing 202.7% of uninsured deposits.
According to Insider Monkey’s database for Q3 2024, 9 hedge funds held a stake in the company. Blackbarn Capital is the largest investor in the company, with holdings valued at over $13 million, as of September 30, 2024. Blue Ridge Bankshares, Inc. (NYSE:BRBS) is one of the best bank penny stocks to buy according to hedge funds.
5. Lloyds Banking Group plc (NYSE:LYG)
Share Price as of the close of January 3: $2.69
Number of Hedge Fund Holders: 10
Lloyds Banking Group plc (NYSE:LYG) is a UK-based financial services company that provides a range of banking and financial services within the country and internationally. It is one of the best bank penny stocks to buy according to hedge funds.
The company has been looking for ways to make the banking experience more flexible for its customers. On January 9, it announced that it would let customers do in-person banking at any of its three brands – Halifax, Bank of Scotland, and Lloyds – irrespective of which bank they had accounts with.
This was a move many saw coming, especially after Lloyds Banking Group plc (NYSE:LYG) introduced standardized uniforms for staff across the three banks last year. According to a report in The Guardian, some staff already move between different brands for work. The shake-up, however, has sparked concerns among unions who fear closures and job cuts ahead, because about 25% of these banks’ branches are located within proximity of one another.
Lloyds Banking Group plc (NYSE:LYG) has also been taking measures to cut costs and push customers toward digital and mobile banking, as part of its five-year strategic plan. In September, the company announced plans to shut another 55 branches, which would mean the group will have closed nearly 300 branches between January 2024 and December 2025. LYG cited a decline in transactions in these branches as the reason for their closures.
During its recent Q3 2024 earnings call on October 24, the group reported £3.8 billion in statutory profit after tax for the first nine months of 2024, with a return on tangible equity of 14%. Year-to-date, the net income stood at £12.7 billion. Lloyds Banking Group plc (NYSE:LYG) saw a significant improvement in sequential income in Q3, aided by a 2% increase in net interest income during the quarter.
Wall Street analysts are bullish on the stock, with a consensus Buy rating and an average share price upside potential of 4%.
4. Mizuho Financial Group, Inc. (NYSE:MFG)
Share Price as of the close of January 3: $4.95
Number of Hedge Fund Holders: 11
Mizuho Financial Group, Inc. (NYSE:MFG) is a bank holding company headquartered in Tokyo, Japan. It operates in five segments: Retail and Business Banking, Corporate and Investment Banking, Global Corporate and Investment Banking, Global Markets, and Asset Management. MFG is the parent company of Mizuho Bank, one of the largest financial services companies in Japan.
On November 13, MFG announced that it would buy a 15% stake in Rakuten Card, a widely used credit card in Japan for $1.06 billion. The move has further bolstered the group’s strategic alliance with Rakuten Group. In 2023, the two companies agreed to raise Mizuho’s stake in Rakuten Securities to nearly half as the latter’s parent company struggled financially.
In October of last year, Mizuho Financial Group, Inc. (NYSE:MFG) acquired a minority stake (less than 5%) in Golub Capital, a US private credit firm. As part of the transaction, it will promote Golub’s products to high-net-worth investors in Japan. This also marked MFG’s first stake in a US private credit asset manager, enabling it to capitalize on the thriving $1.7 trillion industry.
Mizuho Financial Group, Inc. (NYSE:MFG)’s financial performance remains robust. On November 15, the company declared results for FY24 H1, reporting a significant increase in net business profits, driven by consistent banking and non-interest income growth. It also raised the annual dividend estimate for fiscal year 2024 to JPY 130, representing a JPY 25 year-over-year increase.
MFG’s strategic investments, along with its solid financials and commitment to shareholder returns make it an attractive stock. According to Insider Monkey’s database for Q3 2024, 11 hedge funds held a stake in the company, making it one of the best bank penny stocks to buy according to hedge funds.
3. Banco Santander, S.A. (NYSE:SAN)
Share Price as of the close of January 3: $4.49
Number of Hedge Fund Holders: 15
Banco Santander, S.A. (NYSE:SAN) is a Spanish multinational financial services company, headquartered in Santander. It operates as a retail and commercial bank, offering services such as deposits, mutual funds, current and saving accounts, loans, and various other financing solutions.
The company has added five million new customers over the past 12 months to take its tally to 171 million customers across 16 markets. It is among the few European banks with a significant global presence and is known for its focus on delivering diversified services to meet consumer needs.
Automation has been integral to Banco Santander, S.A. (NYSE:SAN)’s success, with the company establishing a standardized model of experience across all markets. Around 60% of its products and services are now available digitally to all customers.
In October 2024, SAN expanded in the United States through the launch of its digital banking subsidiary, Openbank. This is the group’s first nationwide retail banking offering outside the Northeast American Branch Network. The platform combines modern cloud architecture with core banking systems, enabling an easier account opening process.
Banco Santander, S.A. (NYSE:SAN)’s financial performance remains robust. During its recent Q3 2024 earnings call on October 29, the company reported a profit of €3.3 billion, up 12% year-over-year at the back of a growing client base as it focuses on improving customer experience. Profit for the first nine months of 2024 reached €9.3 billion, supported by strong revenue growth across regions. SAN’s balance sheet is also stable, with a robust credit quality and strong capital ratio. The cash dividend in the fiscal year 2024 is expected to be 39% higher than last year.
Solid financial fundamentals and continued customer growth are earning SAN considerable investor confidence. According to Insider Monkey’s database for Q3 2024, 15 hedge funds had investments in the company, up from just 9 at the end of Q2. It is one of the best bank penny stocks to buy according to hedge funds.
2. Banco Bradesco S.A. (NYSE:BBD)
Share Price as of the close of January 3: $1.85
Number of Hedge Fund Holders: 22
Banco Bradesco S.A. (NYSE:BBD) is a Sao Paulo-based company that provides banking products and services to individuals and corporations in Brazil and internationally. It operates through two segments – banking and insurance.
It is one of the largest financial services groups in Latin America, having been in the market for over 80 years. The bank has a nationwide presence across Brazil and also operates in seven other countries, which include the United States, Mexico, the Cayman Islands, Argentina, Hong Kong, Luxembourg, and the United Kingdom.
On October 31, the company posted robust results for the third quarter of fiscal 2024. Revenue was posted at BRL 30.6 billion, growing 3.7% quarter-over-quarter. Net income also increased 11% compared to Q2 to reach BRL 5.2 billion. BBD’s loan book also expanded by 3.5%, driven by a significant surge in loans to SMEs and individuals.
Banco Bradesco S.A. (NYSE:BBD) has also announced plans to launch Bradesco Principal. This will be a credit card targeting high net worth individuals, offering numerous benefits, including points that will not expire in the main lounges of airports, and offer a fast pass across airports in Brazil. The company is hopeful of onboarding between 45,000 to 50,000 new clients in this new segment by late January 2025.
Considering its nationwide presence in Brazil, and branches in key strategic locations internationally, Banco Bradesco S.A. (NYSE:BBD) has been streamlining its structure for quicker and improved decision-making, and enhanced client support. The company is also spending heavily on digital transformation which is likely to yield solid results moving forward.
Wall Street analysts are bullish on the stock, with a consensus Buy rating and an average share price upside potential of 68%. According to Insider Monkey’s database for Q3 2024, 22 hedge funds held a stake in the company, making BBD one of the best bank penny stocks to buy according to hedge funds.
1. Itaú Unibanco Holding S.A. (NYSE:ITUB)
Share Price as of the close of January 3: $4.87
Number of Hedge Fund Holders: 26
Itaú Unibanco Holding S.A. (NYSE:ITUB) is a Brazilian financial services company, headquartered in Sao Paulo. It is the largest banking institution in Latin America, with over $555 billion in assets in 2023, and enjoys a global presence across 19 countries. According to Brand Finance, ITUB is also the most valuable company in Latin America, valued at $8.7 billion as of 2023.
ITUB operates as a full-service, universal bank, offering a wide range of services through several channels. Through its business partnerships, it is able to provide regular discounts, promotions, and other exclusive advantages to its customers to address their daily activities beyond the banking ecosystem.
On November 5, Itaú Unibanco Holding S.A. (NYSE:ITUB) announced financial results for the third quarter of fiscal 2024. It reported quarterly managerial recurring results of BRL 10.7 billion, up 20% year-over-year. The consolidated return on equity (ROE) stood at 22.7%, while in Brazil it was measured at 23.8%. The company’s loan portfolio was also up 1.9% from the last quarter, and 10% compared to the third quarter of 2023.
ITUB’s financial margin with clients was also up 8.2% from last year, reflecting the company’s impressive revenue generation capacity. Another highlight from the quarter was that Itaú Unibanco Holding S.A. (NYSE:ITUB) met its 2019 goal of reaching BRL 400 billion in structuring capital markets operations a year and a half early, in June 2024, instead of the end of 2025.
The company has also been working to enhance its digital presence. It has decided to do away with having seven different apps with separate login methods to two apps, the Super App and Ion, with a single login method. This should help improve customers’ digital experience.
Wall Street analysts are bullish on the stock, with a consensus Buy rating. They also anticipate an average uptick of 47% in Itaú Unibanco Holding S.A. (NYSE:ITUB)’s share price. Investor sentiment continues to improve as well. According to Insider Monkey’s database for Q3 2024, 26 hedge funds had a stake in the company, up from 25 at the end of the second quarter.
Overall, ITUB ranks first among the 10 best bank penny stocks to buy according to hedge funds. While we acknowledge the potential of banking companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ITUB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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