We recently published a list of 10 Best Bank Stocks to Buy in 2025. In this article, we are going to take a look at where Goldman Sachs Group, Inc. (NYSE:GS) stands against other best bank stocks to buy in 2025.
2024 was a stellar year for banking giants in the United States. According to a report in the Financial Times, the seven largest banks in the country by deposits accounted for 56% of the industry’s profits during the first nine months of the year, up from 48% during the same period in 2023.
Among these, the four biggest banks collectively reported around $88 billion in profits between January and September 2024, representing 44% of the American banking industry’s profits. This puts them on course to grab their largest industry share since 2015.
READ ALSO: 10 Best Bank Penny Stocks to Buy According to Hedge Funds and 10 Best Financial Stocks To Buy According to Hedge Funds.
The Federal Deposit Insurance Corporation (FDIC) has stated that equity capital increased by 3.5% in Q3 2024 to $81.6 billion, reflecting the growing capitalization in American banks. In November, the Federal Reserve Board found that 99% of the country’s banks reported capital above the regulatory requirements. This significant improvement from 2020 highlights the banking industry’s collective ability to sustain unforeseen losses.
Credit rating agency, Moody’s, has also upgraded the global banking industry from negative to stable for the first time since 2023, citing monetary adjustments and interest rate cuts among G-20 countries as reasons behind the upgrade. On December 18, the Federal Reserve announced the third cut for the year, reducing the central bank’s target interest rate by a quarter-point to between 4.25% and 4.5%.
Trump’s victory in the US presidential elections has raised hopes of lax regulations in the financial sector amid growing concerns about antitrust scrutiny and capital requirements slowing down investment banking and lending revenues. While the President-elect has yet to name his picks to head the country’s banking agencies, potential nominees are already hinting at pulling back regulations.
Financial analysts believe reduced oversight and a business-friendly environment are likely to drive revenues and loan growth and improve banks’ bottom line. At the same time, they also warn of the risks ongoing geopolitical conflicts can have on the general outlook of the global economy.
Increasing trade tensions, with growing protectionist policies can also hurt investment flows in 2025. Following his election victory, Trump has vowed to impose steep tariffs on imports from Canada, China, and Mexico, which could increase costs for manufacturers. The 78-year-old last month also threatened the EU with tariffs if it does not buy more oil and gas from the United States.
Methodology
For this article, we sampled stocks from an ETF issued by Invesco with exposure to banking companies. From there, we selected the 10 stocks with the highest number of hedge fund investors, based on Insider Monkey’s database of over 900 prominent hedge funds as of Q3 2024. The 10 best bank stocks to buy in 2025 have been ranked in ascending order based on the number of hedge funds holding stakes in them. Where two or more stocks were tied on hedge fund sentiment, we used a higher market cap as a tiebreaker between them.
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).
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The Goldman Sachs Group, Inc. (NYSE:GS)
Number of Hedge Fund Holders: 72
The Goldman Sachs Group, Inc. (NYSE:GS) is an American investment banking and financial services firm. It offers a wide range of financial services to a diversified pool of clients. The company operates through the Global Banking & Markets, Asset & Wealth Management, and Platform Solutions segments.
On January 13, The Goldman Sachs Group, Inc. (NYSE:GS) announced the creation of Capital Solutions Group, a unit to help expand its business in private credit. The Group has been formed by combining solution activities within the company’s Global Banking & Markets segment. It will include the provision of investment banking services to private equity firms, finding investors who could offer capital for deals, and making loans tied to collateral to other lenders.
The company has taken several such steps over the last few years to bring leading market businesses and its investment banking franchise together to offer comprehensive strengths to its clients. This announcement is a continuation of the same practice and will offer The Goldman Sachs Group, Inc. (NYSE:GS)’s clients access to differentiated investment and sourcing opportunities in private credit, which is emerging as one of the hottest areas in Wall Street.
During its Q3 2024 earnings call on October 15, the firm reported net revenues of $12.7 billion, up 7% from last year. EPS was logged at $8.40, growing 54% year-over-year, and comfortably beating estimates of $6.89 per share. ROE for the quarter was 10.4%, while ROTE stood at 11.1%. Assets under supervision surpassed the $3 trillion mark; this was the 27th successive quarter of long-term net inflows.
The strong show reflected the strength of The Goldman Sachs Group, Inc. (NYSE:GS)’s top-notch, interconnected franchises in serving clients despite a challenging market environment. The company is also committed to giving back to shareholders, and returned $2 billion during the quarter, which included $978 million in dividends.
The Goldman Sachs Group, Inc. (NYSE:GS) is one of the best bank stocks to buy in 2025. Wall Street analysts are bullish on the stock, with a consensus Buy rating.
Overall, GS ranks 5th on our list of best bank stocks to buy in 2025. While we acknowledge the potential of banking companies, 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 GS 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.
