We recently compiled a list of the 7 Cheap Bank Stocks To Invest In Before They Take Off. In this article, we are going to take a look at where KB Financial Group Inc. (NYSE:KB) stands against the other cheap bank stocks.
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.
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.
Why do we care about what hedge funds do? 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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KB Financial Group Inc. (NYSE:KB)
Earnings Growth: 178.28%
Forward P/E Ratio: 6.69
Analyst Upside Potential: 33.37%
KB Financial Group Inc. (NYSE:KB) is one of the largest financial services companies based in South Korea. It provides a range of banking services and financial products through its subsidiaries. The group operates Kookmin Bank, which leads its banking services, providing personal and corporate loans, deposits, and investment options to individuals and businesses. The group operates internationally with a presence in Indonesia, Cambodia, and the United States, among others.
On December 12, Morgan Stanley’s analyst Joon Seok upgraded KB Financial Group Inc. (NYSE:KB) from Equal Weight to Overweight and also raised the price target from KRW 94,000 to KRW 105,000. The analyst has placed KB as one of the top picks among the South Korean financial stocks. Moreover, in its fourth quarter 2024 investor letter, Oakmark International Fund expressed a positive outlook on KB Financial Group Inc. (NYSE:KB).
The fund noted that Korean banks generally have struggled with low returns on equity and payout ratios, however, the government’s “value up” program aimed at improving corporate governance and capital efficiency could benefit banks like KB Financial. Oakmark recognized the bank to have a robust capital position and as a low-cost deposit franchise. Here’s what the fund said about the bank:
“KB Financial Group Inc. (NYSE:KB) is a leading South Korean bank that provides a range of financial products and services, including retail banking, corporate banking, wealth management, and international banking services. Korean banks have a history of generating uninspiring returns on equity and low payout ratios (POR), and despite recent geopolitical uncertainty, there is broad support for the government’s value-up program, which aims to address these issues by encouraging better corporate governance, transparency, and improved capital efficiency. As South Korea’s largest bank, KB Financial possesses the industry’s strongest capital position, a renowned low cost deposit franchise and leading fee income, which we believe advantageously positions the company to lead the now improving banking industry in both the speed and magnitude of improvements to POR. In addition, we appreciate management’s focus on shareholder return because the anticipated growth in dividends and buybacks provides downside protection if the multiple expansion portion of the thesis sputters. Despite this compelling set-up, we were excited to purchase shares at an attractive valuation for a bank commonly acknowledged as the best bank in South Korea, per our channel checks.”
Overall KB ranks 5th on our list of the cheap bank stocks to invest in before they take off. While we acknowledge the potential of KB 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 time frame. If you are looking for an AI stock that is more promising than KB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article is originally published at Insider Monkey.
