This article looks at the 10 best bank stocks to buy in 2025. We also discuss the banking industry’s mixed outlook amid monetary adjustments and Trump’s return to the White House.
2024 was a stellar year for banking giants in the United States. According to a report in the Financial Times, the seven largest banks in the country by deposits accounted for 56% of the industry’s profits during the first nine months of the year, up from 48% during the same period in 2023.
Among these, the four biggest banks collectively reported around $88 billion in profits between January and September 2024, representing 44% of the American banking industry’s profits. This puts them on course to grab their largest industry share since 2015.
READ ALSO: 10 Best Bank Penny Stocks to Buy According to Hedge Funds and 10 Best Financial Stocks To Buy According to Hedge Funds.
The Federal Deposit Insurance Corporation (FDIC) has stated that equity capital increased by 3.5% in Q3 2024 to $81.6 billion, reflecting the growing capitalization in American banks. In November, the Federal Reserve Board found that 99% of the country’s banks reported capital above the regulatory requirements. This significant improvement from 2020 highlights the banking industry’s collective ability to sustain unforeseen losses.
Credit rating agency, Moody’s, has also upgraded the global banking industry from negative to stable for the first time since 2023, citing monetary adjustments and interest rate cuts among G-20 countries as reasons behind the upgrade. On December 18, the Federal Reserve announced the third cut for the year, reducing the central bank’s target interest rate by a quarter-point to between 4.25% and 4.5%.
Trump’s victory in the US presidential elections has 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. While the President-elect has yet to name his picks to head the country’s banking agencies, potential nominees are already hinting at pulling back regulations.
Financial analysts believe reduced oversight and a business-friendly environment are likely to drive revenues and loan growth and improve banks’ bottom line. At the same time, they also warn of the risks ongoing geopolitical conflicts can have on the general outlook of the global economy.
Increasing trade tensions, 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. The 78-year-old last month also threatened the EU with tariffs if it does not buy more oil and gas from the United States.
With that said, let’s shift focus and discuss the best bank stocks to buy in 2025.
A shot of customers at an ATM, symbolizing the company’s convenient banking services.
Methodology
For this article, we sampled stocks from an ETF issued by Invesco with exposure to banking companies. 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 stocks to buy in 2025 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 Stocks to Buy in 2025:
10. Citizens Financial Group, Inc. (NYSE:CFG)
Number of Hedge Fund Holders: 46
Citizens Financial Group, Inc. (NYSE:CFG) is an American bank holding company, headquartered in Providence, Rhode Island, that owns the Citizens Bank. The company operates through the consumer banking and commercial banking segments. It has a massive presence across the United States with around 1,100 branches and over 3,000 ATMs.
On October 16, CFG declared financial results for the third quarter of fiscal 2024. It generated a net income of $392 million, translating to an EPS of 79 cents. The return on tangible common equity (ROTCE) stood at 9.7%. Deposits climbed to $5.6 billion, up 40% sequentially. Whereas, assets under management reached $4.1 billion during the quarter. CFG’s private banking segment achieved breakeven in August and September. It is projected to start adding to earnings in Q4.
Citizens Financial Group, Inc. (NYSE:CFG)’s balance sheet remains strong, with a CET1 ratio of 10.6% reflecting its solid capital position. The company returned $516 million to shareholders in Q3, including purchasing $325 million in stock. During the earnings call, CFG announced a quarterly dividend of $0.42 per share to be paid on November 13.
Given its impressive capital position and bullish forecasts for the fourth quarter, Wall Street analysts have a consensus Buy rating for Citizens Financial Group, Inc. (NYSE:CFG), with an average share price upside potential of 9.35%.
According to Insider Monkey’s database for Q3 2024, 46 hedge funds hold a stake in CFG, making it one of the best bank stocks to buy in 2025. AQR Capital Management is the largest investor in the company, with holdings valued at over $189 million, as of September 30, 2024.
9. U.S. Bancorp (NYSE:USB)
Number of Hedge Fund Holders: 46
U.S. Bancorp (NYSE:USB) is an American bank holding company that owns the U.S. Bank National Association. It offers a broad spectrum of financial services to individuals, businesses, government entities, and other financial institutions in the United States. The company is headquartered in Minneapolis, Minnesota. It is one of the best bank stocks to buy in 2025.
On October 30, USB announced structural changes for its payments business, organizing it into two divisions – Payments: Merchant and Institutional (PMI) and Payments: Consumer and Small Business (PCS). Chairman and CEO Andy Cecere believes these changes, which have been made to prepare for the retirement of VC Payment Services, would also help in accelerating U.S. Bancorp (NYSE:USB)’s growth strategy and capitalize on the returns from its recent investments.
During its recent Q3 2024 earnings call on October 16, U.S. Bancorp (NYSE:USB) reported a net income of $1.71 billion, with a diluted EPS of $1.03, beating expectations of $0.99 per share. Net revenue stood at $6.9 billion, which included $4.17 billion of net interest income on a taxable-equivalent basis. ROTCE was 17.9% during the quarter. The bank maintained solid credit quality and reinforced its capital position with a CET1 capital ratio of 10.5%, up from 10.3% at the end of Q2.
In January, Barclays raised U.S. Bancorp (NYSE:USB)’s price target from $57 to $61, with an ‘overweight’ rating for the stock. Overall, the stock has a consensus Buy rating, based on a total of 20 analyst ratings, with an average share price upside potential of 13%. Hedge fund sentiment for USB has been improving as well. According to Insider Monkey’s database for Q3 2024, 46 hedge funds had investments in the company, up from 43 at the end of Q2.