In this article, we will be taking a look at the 10 best diversified bank stocks to buy now. To see more of these stocks, you can go directly to see the 5 Best Diversified Bank Stocks to Buy Now.
The banking sector has been in a crisis ever since the collapse of Silicon Valley Bank (SVB) early in March. This collapse signified perhaps the largest financial crisis in the US since the 2008 crisis, according to many financial professionals. Not much later, First Republic Bank (NYSE:FRC), one of the biggest regional banks in the US, also fell, with its stock price falling as low as $3.51 on April 29.
What’s Happening to First Republic Bank Today?
On April 28, the US Federal Deposit Insurance Corporation (FDIC) was announced to be preparing to place First Republic Bank (NYSE:FRC) under receivership imminently. What this meant was that the bank was to be closed, with FDIC being appointed as its receiver. During this process, the FDIC would be responsible for liquidating the bank’s assets in order to pay off its depositors and creditors. All in all, being placed in receivership is essentially the end of the road for any financial institution. This news led to First Republic Bank (NYSE:FRC) falling by 50% right after the announcement was made.
In the wake of First Republic Bank’s (NYSE:FRC) collapse so soon after the SVB crash, many banking stocks such as the Goldman Sachs Group, Inc. (NYSE:GS), JPMorgan Chase & Co. (NYSE:JPM), and Citigroup Inc. (NYSE:C) have been under scrutiny. Many investors are shying away from banking stocks at the moment, but some consider this time to be optimal for buying financial stocks at a discount. Banks are some of the institutions that will always be around – people will always need reliable companies to manage their accounts and finances. And historically, banking companies have performed well in the market.
How Have Banks Been Performing Generally?
According to a report published by RSM US, a management consulting company, in December, banks have managed to keep up US private equity deal activity through the third quarter of 2022. Data on this through the end of September shows that private equity deal activity totaled $819 billion. Additionally, new innovations and trends within the financial sector have also managed to keep it afloat. An example of one such innovation is fintech, which heavily relies on utilizing the Internet of Things (IoT) to make payments and financial services widely and digitally accessible to consumers. According to the report, between 2018 and 2026, the global IoT ecosystem in the banking market is predicted to grow at a compound annual growth rate of 26.5%.
Technological advancements within the financial services sector have also resulted in fintech solutions such as Buy Now, Pay Later (BNPL) being more widely accessible today. According to Insider Intelligence, BNPL payment volume is expected to increase by 25.5% year-over-year by the end of 2023. All these new trends with major growth projections represent the bright future awaiting the banking sector, meaning now would be the perfect time to cash in on major banking stocks offering these new innovations as part of their financial products and services. So despite the fact that the banking sector has been taking a hit in 2023, investors should retain their optimism when it comes to major diversified banking companies because, for them, the only way to go is up.
Photo by Mikel Parera on Unsplash
Let’s now take a look at the 10 best diversified bank stocks to buy now.
Our Methodology
We have selected diversified banking stocks that are popular among hedge funds today for our list below. Each of these banks offers a range of diverse financial products ranging from regular banking services to investment banking, credit, and wealth management services, among more. We used Insider Monkey’s hedge fund data for the fourth quarter, when 943 hedge funds were tracked, to pick the top stocks based on hedge fund sentiment. We then ranked these stocks on this basis from the lowest to the highest number of hedge funds holding stakes in them. We also used data from TipRanks to show the potential of these stocks to rise relative to their current stock price.
Best Diversified Bank Stocks to Buy Now
10. UBS Group AG (NYSE:UBS)
Number of Hedge Fund Holders: 16
UBS Group AG (NYSE:UBS) is a diversified banking company based in Zurich, Switzerland. The company provides financial advice and solutions to private, institutional, and corporate clients.
Kian Abouhossein, an analyst at JPMorgan, holds an Overweight rating on UBS Group AG (NYSE:UBS) shares as of April 11.
The average price target placed on UBS Group AG (NYSE:UBS) shares by Wall Street analysts is $25.24. The shares were trading at $20.25 on April 29. This gives the stock an upside potential of 24.64%. Analysts see UBS Group AG (NYSE:UBS) as a Moderate Buy, considering the fact that the stock has six Buy ratings and five Hold ratings.
Levin Capital Strategies was the largest shareholder in the company at the end of the fourth quarter, holding 654,485 shares. In total, 16 hedge funds were long UBS Group AG (NYSE:UBS), with a total stake value of $249 million.
Miller Value Partners, an investment management company, mentioned UBS Group AG (NYSE:UBS) in its first-quarter 2023 investor letter. Here’s what the firm said:
“We did find one opportunity irresistible. We initiated a new position in UBS Group AG (NYSE:UBS) (UBS $20.79). UBS was well-positioned enough to be the anointed savior of the failed Credit Suisse. We think UBS got a sweetheart deal. We aren’t alone. JP Morgan penned a recent piece titled, “Transformative deal creating a Wealth Management powerhouse.”
The Financial Times reported that Credit Suisse’s Swiss bank alone was worth 3x the price paid. UBS guided for pro forma tangible book value of over $28 per share implying it’s trading at 0.7x tangible book value. This is cheaper than all but the most troubled regional banks.
The integration will be messy and prolonged, which is enough to deter most investors. Longer-term, we think business fundamentals will be greatly improved (unlike regional banks who likely face increased regulatory pressure). Scale will increase and business mix will shift towards asset management. Both should improve returns on equity. We think UBS should be able to earn over $4 per share in a few years, with a mid-to-high teens return on tangible equity. We think the stock should double over that horizon.
Overall, we remain confident about the portfolio and its prospects. The portfolio mostly consists of opportunities like Expedia and UBS: companies where we see strong fundamentals and cash flow where the market doesn’t accurately reflect the long-term prospects. We have confidence the portfolio can withstand any short-term challenges and deliver strong long-term returns.”
UBS Group AG (NYSE:UBS), like Goldman Sachs Group, Inc. (NYSE:GS), JPMorgan Chase & Co. (NYSE:JPM), and Citigroup Inc. (NYSE:C), is among the top bank stocks according to hedge funds today.
9. Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG)
Number of Hedge Fund Holders: 17
Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) provides commercial banking, leasing, securities, consumer finance, and other services. It is based in Tokyo, Japan.
In the fiscal second quarter of 2023, Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) generated revenues of $5.98 billion, beating estimates by $1.27 billion. Analysts on Wall Street see the stock as a Moderate Buy. They have placed an average price target of $9.28 on Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG), which was trading at $8.21 on April 29. This gives the stock an upside potential of 13.03%.
There were 17 hedge funds long Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) in the fourth quarter, with a total stake value of $98.2 million.
8. Royal Bank of Canada (NYSE:RY)
Number of Hedge Fund Holders: 17
Royal Bank of Canada (NYSE:RY) is a diversified financial service company operating across the globe. It is based in Toronto, Canada.
Gabriel Dechaine, an analyst at National Bank, holds an Outperform rating on Royal Bank of Canada (NYSE:RY) shares as of March 2.
Royal Bank of Canada (NYSE:RY) generated revenues of $11.1 billion in the fiscal first quarter of 2023, representing a growth of 8.81% year-over-year. The average price target placed on the stock by analysts is $102.92. Royal Bank of Canada (NYSE:RY) was trading at $99.31 on April 29, so the average price target gives the stock an upside potential of 3.64%.
D E Shaw was the largest shareholder in the company at the end of the fourth quarter, holding 704,900 shares. A total of 17 hedge funds were long Royal Bank of Canada (NYSE:RY), with a total stake value of $147 million.
7. Toronto-Dominion Bank (NYSE:TD)
Number of Hedge Fund Holders: 17
Toronto-Dominion Bank (NYSE:TD) is a diversified bank providing a range of financial products and services such as personal deposits and checking or savings products. It is based in Toronto, Canada.
On April 18, CIBC’s Paul Holden upgraded shares of Toronto-Dominion Bank (NYSE:TD) from Neutral to Outperform.
Analysts see Toronto-Dominion Bank (NYSE:TD) as a Moderate Buy since the stock had eight Buy ratings and three Hold ratings. They have placed an average price target of $74.38 on the stock, with a high forecast of $80.91. Considering the fact that Toronto-Dominion Bank (NYSE:TD) shares were trading at $60.63 on April 29, this price target gives the stock an upside potential of 22.68%.
Toronto-Dominion Bank (NYSE:TD) was found among the 13F holdings of 17 hedge funds in the fourth quarter. Their total stake value was $185 million.
6. Nu Holdings Ltd. (NYSE:NU)
Number of Hedge Fund Holders: 31
Nu Holdings Ltd. (NYSE:NU) is a diversified banking company that provides a digital banking platform and digital financial services. It is based in São Paulo, Brazil.
In the fourth quarter, Nu Holdings Ltd. (NYSE:NU) generated revenues of $1.45 billion, rising 128.08% year-over-year. Analysts have placed an average price target of $7.30 on the shares, which were trading at $5.16 on April 29. This gives the stock an upside potential of 41.47%. Analysts also see Nu Holdings Ltd. (NYSE:NU) as a Strong Buy, since it has four Buy ratings and one Hold rating.
ARK Investment Management was the largest shareholder in Nu Holdings Ltd. (NYSE:NU) at the end of the fourth quarter, holding 4.3 million shares. There were 31 hedge funds long the stock, with a total stake value of $1.2 billion.
Nu Holdings Ltd. (NYSE:NU), like Goldman Sachs Group, Inc. (NYSE:GS), JPMorgan Chase & Co. (NYSE:JPM), and Citigroup Inc. (NYSE:C), is a bank stock that is highly popular among hedge funds today.
Click to continue reading and see the 5 Best Diversified Bank Stocks to Buy Now.
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Disclosure: None. 10 Best Diversified Bank Stocks to Buy Now is originally published on Insider Monkey.