In this article, we will look at the 7 Cheap Bank Stocks To Invest In Before They Take Off.
Banking Sector Outlook 2025
On December 10 Fidelity Investment released its banking sector outlook for 2025, highlighting tailwinds for the sector which can result in positive momentum for the year. According to Matt Reed, the Fidelity Sector Portfolio Manager, the financial sector experienced significant growth in 2024. The industry is reported to have increased by over 30% as of mid-December, outperforming the broader S&P 500 index by 5 percentage points. As per the analysts, the surge was driven by the post-election boost and improved economic conditions. Reed highlighted that despite the concerns such as the collapse of several small-to-mid-sized banks at the beginning of 2024. The market perceived these issues as isolated rather than a wider crisis, thereby allowing the economic strength to overshadow these challenges quicker than anticipated.
Matt Reeds noted that the financial sector is expected to remain on solid ground in 2025, driven by steady US economic growth. The cyclical nature of financial stocks means their performance is closely linked to the broader economy, which is showing signs of resilience and a potential soft landing. Fidelity Investment identified that larger institutions are expected to potentially recover from past regulatory issues and capitalize on improved market conditions. Moreover, regional banks with strong credit quality and strategic acquisitions are also expected to increase their market shares. Lastly, payment processing companies and financial technology companies are also expected to thrive due to their sensitivity to economic activity and consumer spending patterns.
The report highlighted that while the outlook is optimistic there are some inherent risks including further interest rate cuts, which could compress net interest margins for banks, impacting profitability. In addition, some banks may face challenges related to their commercial real estate holdings if economic conditions worsen, leading to weaker loan demand and increased nonperforming loans.
With that let’s take a look at the 7 cheap bank stocks to invest in before they take off.
A financial advisor in a suit, pen in hand, talking to a client in the bank.
Our Methodology
To compile the list of 7 cheap bank stocks to invest in before they take off, we used the Finviz stock screener, Seeking Alpha, and Yahoo Finance. Using the screener we aggregated an initial list of bank stocks trading under a Forward P/E of 15 with positive earnings growth and analyst upside potential of at least 25%. Next, we cross-checked the Forward P/E for each stock from Seeking Alpha, earnings growth from Yahoo Finance, and analyst upside potential from CNN. Lastly, we ranked the stocks in ascending order of the analyst upside potential. Please note that the data was collected on January 31, 2025.
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7 Cheap Bank Stocks To Invest In Before They Take Off
7. Itaú Unibanco Holding S.A. (NYSE:ITUB)
Earnings Growth: 6.36%
Forward P/E Ratio: 7.72
Analyst Upside Potential: 29.31%
Itaú Unibanco Holding S.A. (NYSE:ITUB) is a major financial institution based in Brazil that offers a range of banking and financial services to individuals and businesses. The bank has a presence in 18 countries around the globe and is renowned for its Phygital. The Phygital model combines physical and digital modes of services to provide clients with a wholesome banking experience.
On January 17, Thiago Batista, an analyst at UBS, upgraded Itaú Unibanco Holding S.A. (NYSE:ITUB) from a Neutral rating to a Buy rating, however, reduced the price target from R$42 to R$41. Batista noted that the current valuation of the bank is attractive for a premium Brazilian Bank. Moreover, the firm expects the bank to post decent profitability with a double-digit dividend yield.
Financially speaking, Itaú Unibanco Holding S.A. (NYSE:ITUB) grew its recurring managerial results by 19.4% year-over-year to reach R$10.7 billion for the fiscal third quarter of 2024. On the other hand, the credit portfolio also grew by 9.9% during the same time. Management during the earnings call noted that their ability to innovate and adapt has allowed the bank to become one of the largest banks in Latin America. It is one of the cheap bank stocks to invest in before they take off.
6. Woori Financial Group Inc. (NYSE:WF)
Earnings Growth: 303.17%
Forward P/E Ratio: 3.8
Analyst Upside Potential: 30.47%
Woori Financial Group Inc. (NYSE:WF) is a financial holding company based in South Korea. It provides various financial services including banking, financial technology, research and analysis, credit, and investment. The group provides banking services through its primary subsidiary Woori Bank, which offers traditional banking services such as accepting deposits, providing loans, and facilitating foreign currency exchanges.
During the fiscal third quarter of 2024, Woori Financial Group Inc. (NYSE:WF) posted robust growth. Its cumulative net income of KRW 2.6591 trillion grew 9.1% year-over-year and surpassed last year’s total by about KRW 150 billion within just three quarters. During the third quarter alone the group posted KRW 903.6 billion in net income and exceeded market expectations of KRW 900 billion for the second consecutive quarter. Management noted that the group performed well despite challenges such as margin contraction due to falling market interest rates.
Woori Financial Group Inc. (NYSE:WF) is actively working to enhance its non-bank business operations and diversify its income sources. For instance, in August 2024, the group merged Woori Investment Bank and F&I Securities to create a new entity called Woori Investment Securities. Moreover, it also signed a Framework Partnership Agreement (FPA) with Toon Yang and ABL Insurance, laying the groundwork for entering the insurance industry. It is one of the cheap bank stocks to invest in before they take off.
