In this article, we will discuss: 7 Best Bank Stocks To Buy in 2024.
The largest dip since August occurred in U.S. stocks on September 4, 2024, when the market fell 1.6%. The decline was mostly caused by drops in the technology and energy markets amid economic uncertainty. The market remained volatile, and worries about jobs and economic data mounted, as the August BLS report shows the US created fewer than anticipated jobs in August 2024. Nonfarm jobs grew at 142,000 but remained below the Dow Jones forecast of 161,000. However, the unemployment rate went down from 4.3% in July to 4.2% in August.
Treasury yields dropped to 3.85% as investor attention turned to impending payroll data that may have an impact on the Fed’s interest rate decisions. Despite a historically challenging September, some analysts see possible drops as buying opportunities, citing investors’ controlled inflation and high cash reserves.
Despite the financial volatility, the financial services industry’s long-term outlook is still favorable. As we discussed in our article “25 Biggest Financial Firms in the World,” the financial services industry is projected to grow at a 7.7% CAGR from $31138.82 billion in 2023 to $33539.52 billion in 2024.
According to IBM’s report, financial services are being revolutionized by generative AI, which increases productivity and automates tasks. AI speeds up fraud detection by 50% and decreases transaction processing times by 30%, as per IBM’s survey. While 75% of financial workers expect AI to automate 25% of their duties, it aids in the analysis of market trends in investment management. AI-driven chatbots reduce human labor by 80% and increase query processing accuracy by 85% in customer support. Furthermore, generative AI improves data management in CRM systems by automatically summarizing calls and extracting insights, boosting CRM update efficiency by 30% and saving companies millions of dollars in operating expenses while strengthening client relationships.
Specifically, the global retail banking market was valued at $2.08 trillion in 2023 and $2.21 trillion this year, according to the Precedence Research. The market is projected to grow at a CAGR of 6% to reach approximately $3.97 trillion by 2034, per the research. In 2023, Asia Pacific held the highest share of 34.14% in the market. It is anticipated that North America is predicted to be the second-largest region for the retail banking market during the projection period.
Looking ahead, the 2024 U.S. Banking Industry Outlook Survey by KPMG outlines the major obstacles and prospects that banks face in the face of technological, regulatory, and financial disruptions. Of the 200 banking CEOs surveyed, 65% claimed that generative artificial intelligence is an integral part of their institution’s long-term vision and strategy, and 60% said that their companies have GenAI-enabled cybersecurity in both pilot and production stages. Despite challenges including interest rate risks and geopolitical unpredictability, two-thirds of executives are still confident in their bank’s growth prospects, with 59% predicting inorganic profitability growth. Regulatory intensity dominates focus, with 80% thinking regulatory supervision and enforcement in the area of cyber risk will increase, while 55% of institutions have boosted their resources to manage cyber threats. Moreover, following the Fedwire and SWIFT deadlines in November 2025 and March 2025, respectively, ISO 20022 compliance is a top priority for U.S. banks.
With that said, here are the 7 Best Bank Stocks To Buy in 2024.
A close-up of a hand depositing a check into a bank ATM.
Methodology:
We sifted through holdings of bank ETFs and financial media covering bank stocks to form an initial list of 20 bank stocks. Then we selected the 7 stocks that were the most popular among institutional investors. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
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)
7. Nu Holdings Ltd. (NYSE:NU)
Number of Hedge Fund Investors: 59
Nu Holdings Ltd. provides digital banking services. Several financial services are available through it, including rewards, mobile payments, business accounts, credit cards, personal accounts, investments, personal loans, and insurance. Brazil is where the company generates the majority of its revenue.
The digital banking platform is accessible in Uruguay, the United States, Germany, Argentina, Brazil, Mexico, and the Cayman Islands.
NU’ Q2 FY24 adjusted net income increased to $563 million from $263 million in Q2 of the previous year, with a 65% YoY jump in revenues pushed by 5.2 million new clients, 25% higher than last year. The digital banking services provider has also experienced growth as a result of its successful entry into Mexico and Colombia, where notable deposits have solidified the company’s standing as a leading digital banking platform in Latin America. However, analysts believe there’s still a risk associated with currency fluctuations despite excellent development.
Nu Holdings Ltd. (NYSE:NU) stock is grabbing the attention of financial analysts. Highlighting excellent growth, improved asset quality, and strategic development in Mexico, Morgan Stanley reiterated its Overweight rating on the financial firm with a $16 price objective. It is anticipated that the acquisition of AI startup Hyperplane will improve client segmentation and increase revenue per customer.
Baron FinTech Fund stated the following regarding Nu Holdings Ltd. (NYSE:NU) in its first quarter 2024 investor letter:
“Nu Holdings Ltd. (NYSE:NU) is a digital bank with operations in Brazil, Mexico, and Colombia. Shares appreciated during the quarter after the company reported strong balance sheet growth and improving margins. New product launches and expansion in newer countries are yielding favorable results. Nu also benefited from inclusion in the MSCI Brazil Index, which prompted buying from passively managed funds. We continue to own the stock because Nu is disrupting the financial services industry in Latin America with its digital distribution and intense focus on user experience. The company has grown to serve over 90 million customers in less than 10 years, largely through word-of-mouth referrals. We believe the company’s superior product offering will drive continued share gains in large and growing markets.”
Warren Buffett’s Berkshire Hathaway is the largest shareholder in the company, with 107,118,784 shares worth $1,380.76 million.
6. Morgan Stanley (NYSE:MS)
Number of Hedge Fund Investors: 62
Morgan Stanley (NYSE:MS) is a multinational investment bank with roots dating back to 1924 through its legacy companies. The company’s three business segments are institutional securities, wealth management, and investment management. Institutional securities account for about 45% of net revenue, wealth management for 45%, and investment management for 10%. The revenue from outside the Americas accounts for about 30% of the total. At the end of 2023, the firm employed about 80,000 employees and had over $5 trillion in customer assets.
Since switching from investment banking to wealth management, MS has established a more reliable business model, which will significantly affect the company’s long-term success. Investment banking is capital intensive, and many banks, particularly European investment banks, have struggled to make appropriate returns in that area and have purposefully reduced their scope. Nonetheless, the investment bank firm has expanded its market share while remaining committed to investment banking. In its institutional securities division, the company saw significant returns on equity of almost 16% in 2020 and 20% in 2021, although over the past ten years, the average was only about 11%.
Despite volatility associated with its Wealth Management division, Morgan Stanley (NYSE:MS) stock has risen by more than 37%, from $70 in January 2021 to $97 today. In 2024, the stock returned just more than 3%, underperforming the broader market’s 14.43% growth by 11.43%.
Revenue during the entire second quarter of 2024 exceeded experts’ forecasts, coming in at over $15 billion, a 12.39% YoY rise. Revenue for the Wealth Management segment increased to $6.8 billion in Q2 2024 from $6.6 billion in the previous year. The bank’s net new asset addition was $36.4 billion, far less than the $89.5 billion it added during the same period last year. Recent high earnings performance has also been attributed to operating leverage.
Ken Fisher’s Fisher Asset Management is the largest shareholder in the company, with 21,814,109 shares worth $2.12 billion.
5. The Goldman Sachs Group, Inc. (NYSE:GS)
Number of Hedge Fund Investors: 68
One of the top asset management and investment banking companies in the world is The Goldman Sachs Group, Inc. (NYSE:GS). Investment banking accounts for about 20% of its revenue, trading for 45%, asset management for 20%, wealth management for 15%, and retail financial services for 15%. The Americas account for over 60% of the company’s net revenue, followed by Asia at 15% and Europe, the Middle East, and Africa at 25%.
The projects that GS has been working on over the past few years are being refocused. It highlighted three priorities at its investor day in 2023. It aims to increase customer wallet share and expand its financing business in its trading and investment banking operations. It also plans to boost its management fees in asset and wealth management, particularly in wealth management, and raise outside funding for its alternative business. Its goal with its new platform company is to grow and turn a profit.
After the bank stopped its consumer banking projects, including a $470 million loss from the closure of its Marcus loan, the stock recovered during the previous year.
The company announced $12.73 billion in revenue, a 21.10% YoY growth, and $3.04 billion in net income for Q2 2024. The growth was driven by its strong performance in its Asset & Wealth Management and Global Banking & Markets segments. In each of these categories, revenue growth was 27% and 14% YoY, respectively.
Ariel Appreciation Fund stated the following regarding The Goldman Sachs Group, Inc. (NYSE:GS) in its Q2 2024 investor letter:
“Shares of global investment bank, The Goldman Sachs Group, Inc. (NYSE:GS), also rose in the period following solid earnings results, highlighted by strength in fixed income, currencies 1 Sindreu, Jon. “The Second Quarter Split the Market.” The Wall Street Journal, July 1, 2024, p. B9. and commodities (FICC) as well as equities trading and better-than-expected investment banking fees. Meanwhile, GS continues to successfully execute on its strategic initiatives to improve the overall return of the company. It is right sizing headcount and narrowing its ambitions in consumer strategy through divestitures and working to improve profitability in Platform Solutions by 2025. With the possibility of increased capital requirements from its regulators, GS plans to reign in buybacks over the short-term but maintain its dividend. Looking ahead, we continue to view the near and long-term outlook for Goldman as attractive, given favorable business trends, continued positive momentum on strategic initiatives and active expense/capital management programs.”
A buy rating for Goldman Sachs with a $571 price target was confirmed by Jefferies analyst Daniel Fannon, who cited the company’s solid performance in its alternatives business and anticipated margin increase. According to Fannon, new initiatives and fee hikes would enable GS to boost its operating margin in Asset & Wealth Management from 23% in H1 2024 to a mid-20% by early 2025.
Ken Fisher’s Fisher Asset Management is the largest shareholder in the company, with 5,658,587 shares worth $2.36 billion.
4. Wells Fargo & Company (NYSE:WFC)
Number of Hedge Fund Investors: 83
Wells Fargo, which was founded in 1852, is presently the fourth-largest bank in the US. It offers a comprehensive range of financial services and products and is operating in 35 countries globally. The US-based financial company provides a wealth of resources for financial education as well as individualized assistance from financial advisors.
The second-quarter 2024 earnings of Wells Fargo & Company (NYSE:WFC) surpassed average estimates for both the top and bottom lines. Nevertheless, the business underperformed on net interest income, a critical indicator for banks, and since Q4 2022, it has decreased each quarter. Its net interest income, which measures the difference between interest revenue earned from loans and interest expenses, declined 9% YoY, and the bank now expects an 8-9% drop in net interest income this year.
One of the “9 Best Financial Services Stocks To Buy Now” has strengthened its trading and investment banking operations under Scharf, hiring a few senior executives from competitors. In the second quarter of 2024, Wells Fargo’s revenue from investment banking increased by 38% to $430 million YoY.
The firm is nevertheless limited by a $1.95 trillion asset limitation and continuous regulatory oversight in spite of its expansion.
Analysts anticipated stronger net interest income as part of the investor “bull thesis” entering into the quarter, thus, management’s lowered outlook for NII is expected to put pressure on the stock, according to Citigroup analyst Keith Horowitz in a note.
Wells Fargo & Company (NYSE:WFC) is sticking with its multi-year restructuring, focusing on cost-cutting to increase its efficiency ratio and putting an asset cap in place until 2024. In addition, the bank is rebuilding its wealth segment, middle-market investment banking, and its card business.
Natixis Global Asset Management’s Harris Associates is the largest shareholder in the company, with 21,386,721 shares worth $1.27 billion.
3. Citigroup Inc. (NYSE:C)
Number of Hedge Fund Investors: 85
The third largest U.S. lender, Citigroup Inc. (NYSE:C), has headquarters in New York, was established in 1812, and offers financial services and products. The segments that it operates through include Corporate/Other, Institutional Clients Group, and Global Consumer Banking.
Citigroup operates a retail banking division with a domestic focus as well as an international commercial banking franchise. Large trading, investment banking, international corporate banking, and custody operations are all part of the bank’s commercial operations, which include services, markets, and banking segments (which were formerly combined under the Institutional Client Group, or ICG). Given its impossible-to-replicate global scope, Citi’s most distinctive business is its commercial banking division. Citigroup’s global reach contributes to its continued status as the preferred bank for multinational corporations.
The company earnings for the second quarter of 2024, are comfortably above analyst consensus projections for both revenue and earnings, powered by strong performance in Markets and Investment Banking, which reported YoY revenue increases of 6% and 38%, respectively. Shares fell by about 2% in spite of the impressive results, though, amid investor worries about expenses, dividends, and market share and as Citigroup issued a warning that costs for FY 2024 may come in at the higher end of the range.
Diamond Hill Capital Long-Short Fund stated the following regarding Citigroup Inc. (NYSE:C) in its first quarter 2024 investor letter:
“Other top Q1 contributors included Meta Platforms, Citigroup Inc. (NYSE:C) and Walt Disney. Banking and financial services company Citigroup’s restructuring efforts are ongoing, and it continues remediating regulatory issues and building capital in anticipation of increased requirements. The company expects to see expenses fall meaningfully in the second half of 2024, bolstering the outlook from here.”
The Hold rating given by DBS analyst Lim Rui Wen is a reflection of worries about small growth catalysts and restructuring difficulties. However, analysts also considered 2024 a transitional year for Citigroup Inc. (NYSE:C), as the company becomes leaner under CEO Jane Fraser’s turnaround.
Although high investment expenses and continuous regulatory scrutiny may put pressure on the financial company’s short-term performance, the company’s strategic exits and efficiency gains are intended to increase future profitability.
Warren Buffett’s Berkshire Hathaway is the largest shareholder in the company, with 55,244,797 shares worth $3.51 billion.
2. Bank Of America Corporation (NYSE:BAC)
Number of Hedge Fund Investors: 92
Following the 2008 financial crisis and years of problems, Bank Of America Corporation (NYSE:BAC) has become the second-biggest commercial bank in the United States in terms of total assets. The bank has a strong commercial banking franchise, is a Tier 1 investment bank, and ranks among the top four credit card issuers and acquirers in the US. It is one of the best retail branch networks and overall retail franchises in the country and owns the Merrill Lynch franchise, which has grown into one of the top brokerage and advisory firms in the country.
The four main business segments of BAC are Global Wealth & Investment Management (GWIM), Global Banking, Global Markets, and Consumer Banking. Through business diversification, BAC lowers the risk associated with market and industry-specific downturns while offering a wide range of banking and nonbank financial services and products.
Since its introduction in 2024, the prominent bank’s virtual financial assistant, Erica, has supported both corporate and individual services for over two billion customers.
Bank Of America Corporation (NYSE:BAC) reported better-than-expected earnings for the second fiscal quarter 2024 due to strong performance in the investment banking division and strong net interest income. The earnings report caused the share price to rise by more than 5% YoY, hitting a high not seen since the beginning of FY 2022.
ClearBridge Value Equity Strategy stated the following regarding Bank of America Corporation (NYSE:BAC) in its first quarter 2024 investor letter:
“We added several new positions during the quarter. Our largest new addition was Bank of America Corporation (NYSE:BAC), one of the world’s leading financial institutions, serving some 66 million consumer and small business clients across the U.S. as well as large corporations, financial institutions and governments globally. We believe that the interest rate pressure that Bank of America faced in early 2023 has subsided, and risks surrounding deposit outflows have abated, which should allow the company to improve its book value and capital growth as well as benefit from a rebound of capital markets activity.”
While potential rate cuts and increasing deposit costs could put pressure on future profitability, analysts think that the company’s growth potential is backed up by its strong revenue from trading and investment banking as well as its favorable net interest income projections.
BAC is one of the Best Bank Stocks To Buy in 2024 since it has promising growth potential. As seen by 19 analysts, BAC has a consensus Buy rating with an average price target of $42.39 and an upside potential of 5.61% from the current stock price.
Warren Buffett’s Berkshire Hathaway is the largest shareholder in the company, with 1,032,852,006 shares worth $41.08 billion.
1. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Fund Investors: 111
Having the top investment bank, commercial bank, credit card, retail bank, and asset and wealth management franchises, JPMorgan Chase & Co. (NYSE:JPM) is undoubtedly the “Biggest Financial Firms in the world,” with a market cap of $619.19 billion and one of the most powerful banks in the US. The bank appears to have a clear route to competitive advantage because of its market size, diversity, and effective risk management, but few other companies have been able to implement a comparable plan. Even the most skillfully run banks occasionally make mistakes, but the firm seems to have assembled all the parts in a less disorganized and more logical manner than its competitors.
It is divided into four main sections: asset and wealth management, corporate and investment banking, commercial banking, and consumer and community banking. JPMorgan is regulated in multiple countries where it conducts business.
Recently, JPMorgan Chase & Co. (NYSE:JPM) Payments extended its partnership with PopID to facilitate in-store biometric transactions throughout the US. Faster transactions are possible with this pay-by-face option because credit cards and phones are not required.
The financial company is attracting the interest of analysts. Piper Sandler maintained its $230 price target and Overweight rating on JPMorgan, pointing out the bank’s capacity to outperform rivals despite market difficulties. Expecting no significant changes in its outlook, the firm applauded JPMorgan for its effective risk profile, leading profitability, and conservative guidance.
Deutsche Bank, on the other hand, downgraded JPMorgan from Buy to Hold, maintaining a target price of $235. The company highlights JPM’s year-to-date performance and praises strong credit quality and higher-than-expected net interest income, but it sees little room for further upside. A Federal Reserve rate decrease in September is anticipated by major banks, including JPMorgan, in response to growing unemployment. This is also the reason for the downgrade.
Carillon Eagle Growth & Income Fund stated the following regarding JPMorgan Chase & Co. (NYSE:JPM) in its first quarter 2024 investor letter:
“JPMorgan Chase & Co. (NYSE:JPM) contributed positively to performance following solid financial results and positive guidance for the remainder of 2024. Moreover, growing chatter around rising capital markets activity likely contributed to the stock’s strong performance relative to other banks. Recall that JPMorgan has a robust capital markets franchise.”
Ken Fisher’s Fisher Asset Management is the largest shareholder in the company, with 12,740,431 shares worth $2.58 billion.
While we acknowledge the potential of the 7 Best Bank Stocks To Buy in 2024, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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