In this article, we discuss 12 best performing bank stocks in 2023. If you want to see more stocks in this selection, check out 5 Best Performing Bank Stocks in 2023.
The tide is slowly turning in favor of stocks in the banking sector after coming under pressure early in the year. A sell-off of long-term bond prices due to rising interest rates rattled the financial stocks resulting in the collapse of a handful of regional banks. As previously reported, in March 2023, the US banking industry faced a crisis with the collapse of three small-to-mid-sized banks: Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank (NASDAQ:SBNY). This event caused public panic, particularly due to SVB's prominent clientele. The banks suffered losses from rising interest rates and their US Treasury bond holdings. While larger banks received assurance for deposit safety from the Federal Reserve, the situation remained uncertain for smaller banks and their depositors. This led to increased withdrawals from smaller banks, while larger banks experienced deposit growth. Banks with diverse groups of equities, like JPMorgan Chase & Co (NYSE:JPM), Bank of America Corp (NYSE:BAC) and Morgan Stanley (NYSE:MS), avoided the crisis, with some ending up acquiring assets of the embattled banks.
As the banking crisis rattled regional banks, there was growing concerns that it could trigger a recession as the one experienced in 2008. Investors were concerned about liquidity levels in the industry and the instability thereabout with most avoiding the sector all together resulting in a massive sell off.
Nevertheless, temporary weakness in high-quality bank stocks provided an excellent opportunity that some investors took advantage of. The sector has since bounced back from the headwinds in the first quarter, with some benefiting from the high-interest rate environment that has triggered a significant increase in revenues from the provision of loans.
Impressive earnings reports from some of the biggest banks, including JPMorgan Chase & Co (NYSE:JPM), have helped rejuvenate sentiments in the industry. Bank of America Corp (NYSE:BAC) shares popped by nearly 4% as the bank delivered a significant jump in profits, with Morgan Stanley (NYSE:MS) rallying 5% as stellar earning results strengthened sentiments on Wall Street.
Some features contributing to the success of the best-performing bank stocks in 2023 include the high interest rate environment, improving economic outlook and an aggressive acquisition spree. In addition, some banks have benefited from innovation and reimagined strategies.
A fresh outlook sees analysts anticipating an overall high earnings season despite coming from a rough 2022. Liz Young, head of investment strategy at SoFi, discussed the financial sector's outlook, highlighting its attractive valuation and strong earnings growth potential, particularly in the second half of the year. She emphasized that financials serve as a hedge against inflation, benefiting from higher interest rates and steeper yield curves. Young recommended focusing on diversified financials like banks, asset managers, and insurance companies over pure-play fintechs.
David George, senior research analyst at Baird, provided positive insights on banks' earnings reports, citing strong results, capital markets activity, loan growth, and lower credit costs. He expressed bullishness on the bank sector and highlighted specific banks he favors. The best stocks in the bank sector are the regional banks, such as U.S. Bancorp (NYSE:USB), Truist Financial Corporation (NYSE:TFC), Comerica Incorporated (NYSE:CMA), Regions Financial Corporation (NYSE:RF), Citizens Financial Group, Inc. (NYSE:CFG), Fifth Third Bancorp (NASDAQ:FITB), and Zions Bancorporation, National Association (NASDAQ:ZION). These stocks are trading at low multiples and have more value than the large-cap banks, according to David George of Baird.
12 Best Performing Bank Stocks in 2023
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Investing in bank stocks requires a clear understanding of individual banks' financial growth metrics and long-term prospects. Therefore, it is important to evaluate factors like loan portfolios' interest rate sensitivity and credit quality. Diversification of the business model is another important factor to consider, as banks with limited exposure to the broader sector are always at risk. Most regional banks collapsed due to their heavy exposure in the bond markets with limited exposure in other sectors.
This article explores insights that provide industry professionals, investors, analysts, and enthusiasts with top picks with durable, quality business models. Here are 12 bank stocks worth noting for their strong performances, fast growth, and sustained value in 2023.
Our Methodology
To compile our list of the 12 best performing banks stocks in 2023 we focused on the stock’s performance year to date. The stocks with the highest gains ranked higher.
JPMorgan Chase & Co (NYSE:JPM) a financial service juggernaut has also been on an impressive run gaining nearly 12% year to date. Like other banks it has benefited from the high interest rate environment as well as acquisitions that have strengthened its competitive edge. The largest bank by market cap is fresh form delivering an impressive Q2 with profits surging to $14.5 billion on revenues of $41.3 billion. Revenues were up 34% and profits up 67% year over year.
The bank has since raised its full year guidance signaling its poised to deliver impressive results. While trading at price to earnings multiple of 9, JPMorgan boasts of a 2.67% dividend yield.
ING Groep NV (NYSE:ING) has been on an impressive run, offering banking products in Europe, North America, and Latin America. The stock is up by about 15% year to date as it continues to take advantage of the higher interest rates in different jurisdictions.
In addition to significant share price appreciation, ING Groep NV (NYSE:ING) also yields a high 4.12% dividend yield and trades with a price-to-earnings multiple of 9.
HSBC Holdings plc (NYSE:HSBC) has been firing on all angles, with its quarterly profit tripling in the first quarter on benefiting from high-interest rates worldwide. The bank recorded a $12.9 billion pretax profit for the quarter ended March, up 207% year over year. Revenue totaled $20.2 billion from $12.5 billion a year ago, driven by higher net interest income.
HSBC Holdings plc (NYSE:HSBC) rewards shareholders through buybacks and dividends. It currently offers a 5.20% dividend yield and trades with a price-to-earnings multiple of 7. The stock is up by 30% year to date.
Headquartered in Dallas, Texas, Triumph Financial, Inc. (NASDAQ:TFIN) is a financial holding company that offers payments factoring and banking services across the United States. It mostly operates through four segments Banking, Factoring Payments, and Corporate.
Triumph Financial, Inc. (NASDAQ:TFIN) is up by about 34% year to date. The strong performance stems from the company’s ability to return value to shareholders through repurchases and dividends. While trading with a price-to-earnings multiple of 18, it is fresh from paying a dividend of $17.81 a share on its 7.125% Series C fixed rate perpetual preferred stock.
Banco Santander SA (BME:SAN) offers retail and commercial banking products and services worldwide. It operates through retail banking Santander Corporate & Investment Banking, Wealth Management & Insurance, and PagoNxt segments.
Banco Santander SA (BME:SAN) has been flying high on the bank, delivering strong growth in customers and volume, with deposits up by 6% in Q1. In addition, it registered double-digit revenue growth and efficiency improvement. The stock is up by about 31% year to date while trading with a price-to-earnings multiple of 6, one of the lowest in the segment. Additionally, Banco Santander SA (BME:SAN) pays a solid 3.14% dividend yield.
First Capital, Inc. (NASDAQ:FCAP) is a bank holding company that provides various banking services to individual and business customers. Based in Corydon, Indiana, the bank has benefited from a high-interest rate environment depicted by growth in net interest income in Q1. First Capital, Inc. (NASDAQ:FCAP) delivered a net income of $3.8 million, up from $2.5 million a year ago.
While the stock is up by about 30% year to date, it has benefited from improved sentiments in the market due to buybacks and dividend payments. First Capital, Inc. (NASDAQ:FCAP) is currently trading with a price-to-earnings multiple of 6 and a solid 3.26% dividend yield.
New York Community Bancorp, Inc. (NYSE:NYCB) is one of the biggest regional banks headquartered in Hicksville, New York. Its impressive run in the market stems from an aggressive acquisition strategy that saw the bank acquire $38 billion worth of assets in March from Signature Bank.
New York Community Bancorp, Inc. (NYSE:NYCB) is already up by more than 30% year to date as it continues to take advantage of the high-interest rate environment. It is one of the cheapest regional banks, trading with a price-to-earnings multiple of 3 and paying a solid dividend yield of 5.89%.
