In this article, we discuss the 10 best European bank stocks to buy now. If you want to skip our detailed analysis of these stocks, go directly to the 5 Best European Bank Stocks to Buy Now.
As the new coronavirus spread globally and led countries to adopt lockdown and social distancing policies, entire sectors including the banking sector were caught off-guard. The banking sector across the globe changed to a digital landscape from a physical one, in many cases overnight. European banking was no exception. Early in the pandemic, digital banking adoption increased by 10 to 20 percent in Europe according to McKinsey’s May 2020 report. Moreover, McKinsey notes that European banks reduced branch capacity by 20 to 30 percent during the shutdowns.
Apart from the increased adoption of digital banking as a long-term trend, the short-term changes affecting the European banking sector include the loose monetary and fiscal policies. While European monetary policy has been easy since the great financial crisis, the pandemic contributed to more stimulus to be injected into the system in the form of ECB’s quantitative easing policies as well as the government deficit spending. These conditions have caused assets under the management of Western European asset managers to rise 5% to EUR 25.2 trillion, according to McKinsey’s report on European asset management.
The ultra-loose monetary policy has propelled the global equity markets to record highs. This led to an increase in deal flow. According to PwC, there were more than 200 M&A transactions between $1 and $5 billion in value in the first five months of 2021, compared to the annual 230 such transactions in the last 5 years while the number of transactions of more than $5 billion in 2021 is outpacing the number in the last several years combined. These developments have benefitted and continue to benefit investment banks – including European giants such as Deutsche Bank Aktiengesellschaft (NYSE: DB), UBS Group AG (NYSE: UBS), Barclays PLC (NYSE: BCS), and Credit Suisse Group AG (NYSE: CS).
Other developments in the European banking sector include the entry of financial institutions into the rental property markets amid record low interest rates. On July 7, Lloyds Banking Group plc (NYSE: LYG) announced its entry into the UK’s private rental market. The company is aiming to purchase 50,000 properties in the next 10 years.
With this context in mind, here is our list of the 10 best European bank stocks to buy now. These companies were ranked keeping in mind the basic business fundamentals, hedge fund sentiment, and analyst ratings for each.
Our Methodology
Regarding the methodology used in this article, we have included only European bank stocks – those banks headquartered in the European Union, Switzerland, or the UK. The stocks were chosen and ranked based on the number of hedge fund holdings as of the end of the second quarter of 2021, based on our data of 873 hedge funds.
Why use hedge fund sentiment to choose stocks? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Photo by Ferran Fusalba Roselló on Unsplash
With this context and industry outlook in mind, let’s now discuss our list of the 10 best European bank stocks to buy now.
Best European Bank Stocks to Buy Now
10. NatWest Group plc (NYSE: NWG)
Number of Hedge Fund Holders: 5
NatWest Group plc (NYSE: NWG) is a British retail and commercial bank with around 1000 branches. In addition, it’s one of the Big Four banks in the UK, along with Barclays PLC (NYSE: BCS), HSBC Holdings plc (NYSE: HSBC), and Lloyds Banking Group plc (NYSE: LYG). It is ranked tenth on our list of 10 best European bank stocks to buy now. The stock has returned over 104.76% to investors over the course of the past year.
On July 30, NatWest Group plc (NYSE: NWG) posted earnings for the second quarter of 2021, reporting earnings per share of $0.30, beating estimates by $0.13. The total income before expenses and tax over the period was around GBP 2.66 billion ($3.72 billion), down 0.60% year-over-year.
At the end of the second quarter of 2021, 5 hedge funds in the database of Insider Monkey held stakes worth $6.6 million in NatWest Group plc (NYSE: NWG).
On August 6, RBC Capital increased its price target on NatWest Group plc (NYSE: NWG) to 250 GBp from 240 GBp and maintained its Outperform rating. On August 4, Goldman Sachs gave NatWest Group plc (NYSE: NWG) a Buy rating with a price target of 305 GBp.
Just like Deutsche Bank Aktiengesellschaft (NYSE:DB), Banco Santander, S.A. (NYSE:SAN), and Barclays PLC (NYSE:BCS), NatWest Group plc (NYSE:NWG) is one of the notable stocks gaining investors’ attention in 2021.
9. Lloyds Banking Group plc (NYSE: LYG)
Number of Hedge Fund Holders: 8
Lloyds Banking Group plc (NYSE: LYG) is a British financial services company and the UK’s largest retail bank with 30 million customers in total. Apart from its retail division, it has Commercial Banking and Insurance & Wealth divisions. It is ranked ninth on our list of 10 best European bank stocks to buy now. The stock has returned over 68.31% to investors over the course of the past year.
On July 29, Lloyds Banking Group plc (NYSE: LYG) posted earnings for the second quarter of 2021, reporting earnings per share of $0.16, beating estimates by $0.03. The total income before expenses and tax over the period was around GBP 3.90 billion ($5.45 billion), up 12.68% year-over-year.
At the end of the second quarter of 2021, 8 hedge funds in the database of Insider Monkey held stakes worth $16 million in Lloyds Banking Group plc (NYSE: LYG), up from 5 the preceding quarter worth $14 million.
Out of the hedge funds tracked by Insider Monkey, investment management firm Cowen Group’s Ramius has the most valuable stake in Lloyds Banking Group plc (NYSE:LYG) as of the end of the second quarter of 2021, worth close to $12.5 million, comprising 3.28% of its 13F portfolio.
On July 30, JPMorgan increased its price target on Lloyds Banking Group plc (NYSE: LYG) to 60 GBp from 59 GBp as it reiterated its Overweight rating.
8. Banco Bilbao Vizcaya Argentaria, S.A. (NYSE: BBVA)
Number of Hedge Fund Holders: 9
Banco Bilbao Vizcaya Argentaria, S.A. (NYSE:BBVA) is a Spanish financial services company, serving customers in more than 30 countries. It is ranked eighth on our list of 10 best European bank stocks to buy now. The stock has returned over 121.62% to investors over the course of the past year.
On July 29, Banco Bilbao Vizcaya Argentaria, S.A. (NYSE: BBVA) posted earnings for the second quarter of 2021, reporting earnings per share of EUR 0.18 ($0.21), beating estimates by $0.09. The gross income over the period was around EUR 5.10 billion ($6.14 billion), up 4.98% year-over-year.
At the end of the second quarter of 2021, 9 hedge funds in the database of Insider Monkey held stakes worth $275 million in Banco Bilbao Vizcaya Argentaria, S.A. (NYSE: BBVA), up from 7 the preceding quarter worth $212 million.
Out of the hedge funds tracked by Insider Monkey, billionaire Ken Fisher’s Fisher Asset Management has the most valuable stake in ING Groep N.V. (NYSE: ING) as of the end of the second quarter of 2021, worth close to $264 million, comprising 0.16% of its 13F portfolio. Fisher Asset Management increased its stake by 6% during the second quarter of 2021, following a 6% increase during the first quarter.
On August 5, RBC Capital boosted its price target Banco Bilbao Vizcaya Argentaria, S.A. (NYSE:BBVA) to EUR 6.20 from EUR 6.10 and maintained an Outperform rating. On August 2, Societe Generale increased its price target on Banco Bilbao Vizcaya Argentaria, S.A. (NYSE:BBVA) to EUR 6.20 from EUR 6 while reiterating a Buy rating.
Banco Bilbao Vizcaya Argentaria, S.A. (NYSE:BBVA) is catching investors’ attention in 2021 as a noteworthy stock, along with Deutsche Bank Aktiengesellschaft (NYSE:DB), Banco Santander, S.A. (NYSE:SAN), and UBS Group AG (NYSE:UBS).
7. ING Groep N.V. (NYSE: ING)
Number of Hedge Fund Holders: 9
ING Groep N.V. (NYSE: ING) is a Dutch financial services company serving clients in more than 40 countries. It is ranked seventh on our list of 10 best European bank stocks to buy now. The stock has returned over 69.16% to investors over the course of the past year.
On August 10, ING Groep N.V. (NYSE: ING) posted earnings for the second quarter of 2021, reporting earnings per share of $0.44, beating estimates by $0.34. The total income before expenses and tax over the period was around EUR 4.52 billion ($5.45 billion), down 3.3% year-over-year.
At the end of the second quarter of 2021, 9 hedge funds in the database of Insider Monkey held stakes worth $602 million in ING Groep N.V. (NYSE: ING).
Out of the hedge funds tracked by Insider Monkey, billionaire Ken Fisher’s Fisher Asset Management has the most valuable stake in ING Groep N.V. (NYSE: ING) as of the end of the second quarter of 2021, worth close to $585 million, comprising 0.36% of its 13F portfolio. Fisher Asset Management increased its stake by 6% during the second quarter of 2021, following a 7% increase during the first quarter.
On August 17, Morgan Stanley increased its price target on ING Groep N.V. (NYSE: ING) to EUR 14.40 from EUR 13 while reiterating an Overweight rating.
6. Credit Suisse Group AG (NYSE: CS)
Number of Hedge Fund Holders: 10
Credit Suisse Group AG (NYSE: CS) is a Swiss financial services company and a part of Wall Street’s bulge bracket, i.e. the world’s largest investment banks. It is ranked sixth on our list of 10 best European bank stocks to buy now.
On July 29, Credit Suisse Group AG (NYSE: CS) posted earnings for the second quarter of 2021, reporting earnings per share of $0.11, missing estimates by $0.11. The net revenue over the period was around CHF 5.10 billion ($5.55 billion), down 17.61% year-over-year.
At the end of the second quarter of 2021, 10 hedge funds in the database of Insider Monkey held stakes worth $137 million in Credit Suisse Group AG (NYSE: CS).
Out of the hedge funds tracked by Insider Monkey, Arrowstreet Capital has the most valuable stake in Credit Suisse Group AG (NYSE: CS) as of the end of the second quarter of 2021, worth close to $55 million, comprising 0.06% of its 13F portfolio.
Furthermore, billionaire Jim Simons’s Renaissance Technologies initiated a new stake in Credit Suisse Group AG (NYSE: CS) during the second quarter of 2021. This stake is worth close to $16 million as of the end of the second quarter.
On July 30, Barclays increased its price target on Credit Suisse Group AG (NYSE: CS) to CHF 12.50 from CHF 12 while reiterating an Overweight rating.
In addition to Deutsche Bank Aktiengesellschaft (NYSE:DB), Banco Santander, S.A. (NYSE:SAN), and HSBC Holdings plc (NYSE:HSBC), Credit Suisse Group AG (NYSE:CS) is one of the notable stocks catching investors’ attention in 2021.
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Disclosure: None. 10 Best European Bank Stocks to Buy Now is originally published on Insider Monkey.
