In this piece, we will take a look at the ten best bank penny stocks to buy now. If you want to skip our analysis of the turmoil in the banking industry that started earlier this year and want to jump to the top five stocks in the list, take a look at 5 Best Bank Penny Stocks to Buy Now.
With the first half of 2023 coming to a close, it’s appearing as if the three year turmoil in the stock market and the economy is entering its last phases. Starting from the outbreak of the coronavirus pandemic, investors have had to deal with massive downswings and some upswings in the market primarily due to macroeconomic events.
These events have also generated shivers in the banking industry. To control inflation, the Federal Reserve has increased interest rates ten times so far, and these have made a mark on banks as well. Banks are required to have adequate capital on hand to ensure that they can meet their obligations in case depositors try to withdraw their money from accounts. These requirements led to the demise of Silicon Valley Bank as it had to take massive losses on its debt securities. How? Well, the bank had invested capital into debt securities that were issued during a time interest rates were low. Since interest is the primary profit a bondholder makes, bonds issued when rates are higher are more valuable and others drop in value. So those that own them have to book losses, and in the case of Silicon Valley Bank, this proved too much and it was taken over by the Federal Deposit Insurance Corporation (FDIC). For a deeper dive into these events, do check out Top 20 Most Profitable Banks in the World.
If you’d clicked on the link above, you’d have found out that the Federal Reserve is required to stress test banks to ensure that any calamitous events would not lead to their insolvency or collapse. There is debate in the market that even if these banks were stress tested, they would have passed since the yields or the value of their bonds was dissimilar to the requirements for these tests. And, these stress tests are also now responsible for recent rallies in bank shares in America.
June 2023 has been the first month of major respite for the baking industry when it comes to share price movements. The KBW Bank Index gained 5% in June, fueled in the final weeks by the Federal Reserve’s announcement that all 23 banks that were subjected to the test had managed to maintain adequate capital. The star of the show was The Charles Schwab Corporation (NYSE:SCHW), whose tier 1 capital ratio stood at 22.8%. It also removed questions about the ability of big banks to handle an adverse environment, with big ticket names such as JPMorgan Chase & Co. (NYSE:JPM), Bank of America Corporation (NYSE:BAC), and Wells Fargo & Company (NYSE:WFC) seeing their CAT1 ratio sit at 11.1%, 10.6%, and 8.2%, respectively. Speaking of big banks, their shares have also fared much better than the banking index. JPMorgan and Wells Fargo’s shares gained 7% in June, while smaller banks posted larger gains, including Bank OZK (NASDAQ:OZK) and PacWest Bancorp (NASDAQ:PACW) seeing 11.6% and 26% share price appreciation, respectively.
The 2023 mini banking crisis has also generated fresh enthusiasm in the ranks of regulators to curtail the banking system. Large financial institutions in America which deal with housing finance and community investment products have the option of relying on the Federal Home Loan Banks (FHLBanks) to secure capital to ensure an adequate supply of money. Banks that were part of this system came into the spotlight when it surfaced that they had provided capital to Silicon Valley Bank and others before they failed. Now, officials are wondering whether they should not only limit the ability of big banks to rely on this system but are also considering whether making banks that borrow from the FHLBanks hold some of their assets in mortgages to stimulate growth in the area.
Regulation and safety are quite important in the banking industry, as the biggest banks in the world often have more money than the foreign exchange reserves of developing countries. Our analysis of the banking industry to determine the biggest banks in the world revealed that the four biggest banks are all state owned Chinese enterprises. However, the biggest private banks in the world, namely JPMorgan (also the fifth biggest bank in the world), Bank of America, and Mitsubishi UFJ Financial Group, Inc. (NYSE:MUFG) with a cumulative asset base close to a whopping $10 trillion. Consider the fact that the Islamic Republic of Pakistan – the world’s fifth most populous nation and a nuclear power – has a mere $3.5 billion in foreign reserves as of mid June and the picture becomes clearer.
As to what the banking industry should expect in 2023, here’s what the management of Goldman Sachs had to say during its latest earnings conference:
The recent events in the banking sector are lowering growth expectations and there is a higher risk of a credit contraction given the environment is limiting banks’ appetites to extend credit. This is an acceleration of a trend and a situation we’re watching closely. Businesses and consumers continue to adjust to higher interest rates.
While the forward trajectory is still unclear, we continue to be cautious about the economic outlook and we are operating the firm such that we are well prepared in the event that the environment weakens further.Overall, I feel very confident about the state of our client franchise and the long-term opportunity set for Goldman Sachs. As the events of the past quarter have illustrated, we are operating from a position of strength and we have the people in place around the world to continue serving the broad range of clients’ needs with excellence.And while much has transpired since we held our Investor Day at the end of February, we remain focused on our strategy to strengthen our leading Global Banking & Markets franchise and grow our Asset & Wealth Management business, and we are committed to delivering for clients and shareholders.
With these details in mind, let’s take a look at some great bank penny stocks to buy according to hedge funds.
Our Methodology
To compile our list of best bank penny stocks, we first made a list of all regional and diversified banks whose shares trade at less than $5. The number of hedge fund investors in them was determined through Insider Monkey’s Q1 2023 survey of 943 hedge funds, and the final list of the top bank penny stocks is as follows. On a side note, Republic First Bancorp, Inc. (NASDAQ:FRBK) has been omitted since it has undergone significant upheaval this year.
10 Best Bank Penny Stocks to Buy Now
10. SHF Holdings, Inc. (NASDAQ:SHFS)
Number of Hedge Fund Investors in Q1 2023: 2
SHF Holdings, Inc. (NASDAQ:SHFS) is one of the younger banks on our list, set up in 2015. It primarily serves the needs of financial institutions that serve the needs of the cannabis industry. The firm extended its relationship with a multistate entity in June 2023 through an additional loan of $2.9 million.
As of March 2023, two of the 943 hedge funds surveyed by Insider Monkey had bought SHF Holdings, Inc. (NASDAQ:SHFS)’s shares. Along with First Foundation Inc. (NASDAQ:FFWM), Banco Santander, S.A. (NYSE:SAN), and Banco Bradesco S.A. (NYSE:BBD), it is a top bank penny stocks with noticeable hedge fund interest.
9. AmeriServ Financial, Inc. (NASDAQ:ASRV)
Number of Hedge Fund Investors in Q1 2023: 3
AmeriServ Financial, Inc. (NASDAQ:ASRV) is a regional bank that operates in Maryland. It provides retail banking services, financial products, working capital finance, and investment funds. The bank held a shareholder’s meeting in May 2023 where its three director nominations were approved.
By the end of this year’s first quarter, three of the 943 hedge funds part of Insider Monkey’s database had invested in AmeriServ Financial, Inc. (NASDAQ:ASRV). Out of these, Jeffrey Gendell’s Tontine Asset Management is the largest investor with a $3.2 million stake.
8. Broadway Financial Corporation (NASDAQ:BYFC)
Number of Hedge Fund Investors in Q1 2023: 3
Broadway Financial Corporation (NASDAQ:BYFC) provides banks, loans, and other banking products. Its earnings results for the first quarter of 2023 saw the bank grow its net interest income by 15.4% annually with total interest income growing by a strong 39.5%.
Insider Monkey took a look at 943 hedge fund portfolios for their March quarter of 2023 investments to find out that three had bought and owned the bank’s shares. Broadway Financial Corporation (NASDAQ:BYFC)’s biggest shareholder in our database is Emanuel J. Friedman’s EJF Capital with an investment of $1.8 million.
7. Inter & Co, Inc. (NASDAQ:INTR)
Number of Hedge Fund Investors in Q1 2023: 3
Inter & Co, Inc. (NASDAQ:INTR) is a Brazilian bank headquartered in Belo Horizonte. It has four operational segments, namely banking, insurance, Asset Management, and Services. It scored a big win in June 2023, when the PCI Security Standards Council (PCI SSC) appointed it to its advisory board – making it the only Brazilian bank on the list.
Three out of the 943 hedge funds part of Insider Monkey’s database had invested in Inter & Co, Inc. (NASDAQ:INTR) as of Q1 2023.
6. Grupo Supervielle S.A. (NYSE:SUPV)
Number of Hedge Fund Investors in Q1 2023: 6
Grupo Supervielle S.A. (NYSE:SUPV) is an Argentinian bank that is one of the oldest firms on our list since it was set up in 1887. It has several different segments that range from personal to corporate banking and asset management. The bank’s first quarter of 2023 earnings saw it turn a loss into a profit and grow its loans as well.
As of Q1 2023, six of the 943 hedge funds polled by Insider Monkey had bought the bank’s shares. Out of these, Grupo Supervielle S.A. (NYSE:SUPV)’s largest shareholder is Jim Simons’ Renaissance Technologies with a $864,000 stake.
Banco Santander, S.A. (NYSE:SAN), Grupo Supervielle S.A. (NYSE:SUPV), First Foundation Inc. (NASDAQ:FFWM), and Banco Bradesco S.A. (NYSE:BBD) are some top bank penny stocks.
Click to continue reading and see 5 Best Bank Penny Stocks to Buy Now.
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Disclosure: None. 10 Best Bank Penny Stocks to Buy Now is originally published on Insider Monkey.
