We recently compiled a list of the 10 Best Bank Penny Stocks to Buy Now. In this article, we are going to take a look at where Banco Santander, S.A. (NYSE:SAN) stands against the other bank penny stocks.
The US banking sector in 2024 faces various challenges and opportunities. Although the industry has recovered from the bank failures of early 2023, it now deals with a slower economy, tighter regulations, and the possibility of interest rate cuts, all of which present risks for the sector.
In the past year, the US banking sector observed the collapse of a couple of well-known banks, which led to uncertainty in regional bank stocks. When considering the broader context, last year’s bank closures were not particularly notable in terms of quantity. The year’s total of five closures pales in comparison to 2009 and 2010, which saw 140 and 157 closures, respectively. However, 2023 stood out due to the substantial total assets of the affected institutions, primarily driven by the significant sizes of First Republic Bank, Silicon Valley Bank, and Signature Bank.
The banks were also heavily funded by uninsured deposits, as a significant portion of their customers held deposits exceeding the FDIC insurance limit of $250,000. This increased their risk during sector volatility. Despite these closures and the following instability, many bank stocks regained stability and ended 2023 with positive returns.
The economic outlook indicates slower growth and the possibility of a rate cut in 2024. This may result in a dip in bank profitability, although it is expected to remain strong, with an anticipated return on common equity ranging from 10% to 11%. Moreover, asset quality is predicted to weaken but should remain manageable, with strong pre-provision earnings providing support.
There are economic risks to consider, including the potential for a recession if the Federal Reserve is not careful enough with rate cuts, as well as the persistent threat of inflation that could result in prolonged high rates. Moreover, credit card charge-offs are anticipated to rise. However, banks with more diversified deposit bases and fewer uninsured deposits are less likely to face high risks as compared to those with more uninsured deposits. Regulatory changes, including the finalization of new capital and resolution requirements, may be implemented in 2024 in response to the banking failures of the previous year.
Despite these challenges, the banking sector is expected to maintain strong profitability and capital buildup, aided by a potentially more favorable rate environment later in the year. Moreover, there are potential investment opportunities in regional banks perceived as undervalued. With this context in mind, let’s take a look at the best bank penny stocks to buy now.
Our Methodology
To compile a list of the 10 best bank penny stocks to buy, we conducted an in-depth analysis. Our first step was to identify banks with share prices below $5. To assess their investment potential, we examined the number of hedge fund investors in these banks during Q1 2024. We used Insider Monkey’s database of over 900 hedge funds to rank the best bank penny stocks according to the hedge fund sentiment.
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).
A view of a large corporate office building, illuminated at night to show its power and reach.
Banco Santander, S.A. (NYSE:SAN)
Number of Hedge Fund Holders: 13
A global banking company since 1857, Banco Santander, S.A. (NYSE:SAN) offers comprehensive financial services through dedicated regional divisions. From core European operations to ventures in North and South America, the company caters to individuals, companies, and institutions.
The company has further expanded its reach with a digital consumer banking segment, covering online banking and consumer finance solutions. This diverse approach solidifies Banco Santander, S.A.’s (NYSE:SAN) position as a key player in the international financial arena.
Banco Santander, S.A. (NYSE:SAN) delivered a stellar Q1 2024 with net profit rising 11% year-over-year, driven by customer growth across all regions and strong performances in each of their global businesses. Revenue nearly reached double-digit growth, while the efficiency ratio recorded an improvement of 1.4 percentage points to 42.6%. The company’s strong balance sheet and focus on technology position it well to achieve its 2024 targets.
Banco Santander, S.A.’s (NYSE:SAN) stock price targets range from a high estimate of $6.96 to a low of $4.61, with an average price target of $6.01, indicating potential upside from current price levels. Moreover, analyst ratings reflect positive sentiment, with 15 analysts currently rating the stock as a “Buy.”
Overall SAN ranks 3rd on our list of the best bank penny stocks to buy. You can visit 10 Best Bank Penny Stocks to Buy Now to see the other bank penny stocks that are on hedge funds’ radar. While we acknowledge the potential of SAN as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SAN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.