In this piece, we will take a look at the 13 best bank stocks to invest in for long term. If you want to skip our coverage of the banking industry and how it started to trouble investors once again this year, you can take a look at 5 Best Bank Stocks To Invest In For Long-Term.
Due to the current macroeconomic environment, the banking industry in the U.S. and globally has been one of the most important and most watched sectors. This is because right now, apart from artificial intelligence and AI stocks, the Federal Reserve's interest rate policy is a must watch item on the agenda of both retail and professional investors. Investors are wondering when the rates will start to drop. These rate cuts will be quite important for the banking industry as well as for broader sectors such as commercial and office real estate that have struggled in the aftermath of turmoil in the bond market. 2023 was a notable year for bank stocks and it saw a widespread bloodbath in the regional banking sector. Multiple big regional banks failed as they were unable to assess the impact of rising bond yields on their asset bases.
This turmoil resurfaced in 2024 as well. While investors were cheering AI stocks and pumping up the shares of NVIDIA Corporation, the shares of New York Community Bancorp, Inc. (NYSE:NYCB) crashed by 59% in late January and early February after the New York state based regional bank warned in its earnings report that it had to allocate additional capital for trouble in the office real estate sector. Additionally, just as the turmoil in 2023 had prompted the Federal Reserve to step up its efforts at ensuring that the U.S. banking sector was healthy by running stress tests, the NYCB scare of 2024 in the wake of its surprising loss and capital allocation has now spurred the Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency, and other banking bodies to inquire from banks whether they are adequately prepared for any untoward events according to media reports. Due to the sizeable role that they play in funding commercial real estate, small banks are quite exposed to jitters in the market, and anyone interested in following bank stocks would also be well advised to watch the commercial real estate sector.
But what about mega bank stocks? After all, following the 2023 regional banking crisis, large banks such as JPMorgan Chase & Co. (NYSE:JPM) and Bank of America Corporation (NYSE:BAC) had remained unscathed despite some fears about their instability. Well, the start of 2024 has seen the Financial Industry Regulatory Authority (FINRA) fine Morgan Stanley (NYSE:MS) a sizeable $1.3 million over the bank's failure to properly deal with municipal securities. Additionally, if we're to slightly expand our focus from pure play banking to the broader financial services sector, then 2024 has also seen one of the biggest deals in the banking industry.
Online banking stock Capital One Financial Corporation (NYSE:COF) announced a whopping $35 billion deal for Discover Financial Services (NYSE:DFS), and as investors remain unconvinced that the affair could clear regulatory scrutiny, analysts believe that if Capital One shows that it will help consumers save money and benefit them in other ways, then it might be able to take on giants such as Mastercard Incorporated (NYSE:MA) and Visa Inc. (NYSE:V).
So, as the banking sector continues to be as dynamic as ever and investors hope for rate cuts soon, we decided to look at some top banking stocks for the long term. A handful of the top names are Bank of America Corporation (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM), and Citigroup Inc. (NYSE:C), and you can also check out 12 Best-Performing Bank Stocks In 2024.
13 Best Bank Stocks To Invest In For Long-Term
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Our Methodology
To make our list of the best bank stocks for the long term, we ranked the forty most valuable diversified and regional banking stocks that trade on U.S. markets by the number of hedge funds that had bought the shares as of Q4 2023 end. Out of these, the bank stocks with the highest number of hedge fund investors were chosen.
For these best bank stocks for the long term, we have also mentioned hedge fund sentiment. Hedge funds' top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That's why we pay very close attention to this often-ignored indicator.
East West Bancorp, Inc. (NASDAQ:EWBC) is a regional bank headquartered in Pasadena, California. Despite a mixed bag of financial performance that has seen the bank beat analyst EPS estimates in only two out of its four latest quarters, the shares are rated Strong Buy on average with an average share price target of $83.79.
As of Q4 2023 end, 38 out of the 933 hedge funds tracked by Insider Monkey had bought a stake in East West Bancorp, Inc. (NASDAQ:EWBC). Ken Griffin's Citadel Investment Group was the firm's biggest investor since it held a $164 million stake.
Along with JPMorgan Chase & Co. (NYSE:JPM), Bank of America Corporation (NYSE:BAC), and Citigroup Inc. (NYSE:C), East West Bancorp, Inc. (NASDAQ:EWBC) is a top bank stock that hedge funds have invested in.
Comerica Incorporated (NYSE:CMA) is a Texas based regional bank that offers banking, wealth management, and associated services. The bank started 2024 on a somber note after it announced that it would be closing more than two dozen branches as part of an effort to reduce expenses.
During last year's fourth quarter, 39 out of the 933 hedge funds part of Insider Monkey's database had held the bank's shares. Comerica Incorporated (NYSE:CMA)'s largest hedge fund investor is Ken Griffin's Citadel Investment Group through its $94.9 million investment.
Webster Financial Corporation (NYSE:WBS) is a Connecticut based bank that provides commercial and consumer banking services. It's another highly rated bank stock, as the shares are rated Strong Buy on average, and the average share price target is $58.79.
As of December 2023 end, 41 out of the 933 hedge funds tracked by Insider Monkey had invested in Webster Financial Corporation (NYSE:WBS). Ric Dillon's Diamond Hill Capital was the bank's biggest stakeholder, as it had piled in $118 million into the stock.
HDFC Bank Limited (NYSE:HDB) is a sizeable regional bank with close to two hundred thousand employees. An Indian bank, February 2024 has been a remarkable month for the bank as it has managed to raise a whopping $300 million by issuing sustainable financing bonds.
Insider Monkey scoured through 933 hedge fund portfolios for last year's December quarter and discovered that 41 funds had bought and owned the bank's shares. HDFC Bank Limited (NYSE:HDB)'s largest stakeholder among these is Andreas Halvorsen's Viking Global due to its $653 million stake.
KeyCorp (NYSE:KEY) is one of the oldest banks on our list since it was set up in 1849. February 2024 has seen the bank step up its community outreach and giving efforts, by announcing multiple grants that cover Latino college preparedness, energy efficient housing, culinary apprenticeships, and other unique areas.
During 2023's December quarter, 49 out of the 933 hedge funds covered by Insider Monkey's research had held a stake in KeyCorp (NYSE:KEY). Ken Griffin's Citadel Investment Group was the biggest investor through its $259 million investment.
First Horizon Corporation (NYSE:FHN) is a mid sized regional bank headquartered in Memphis, Tennessee. The bank has missed analyst EPS estimates in two out of its four latest quarters, and its shares are rated Buy on average.
After scouring through 933 hedge fund portfolios for 2023's fourth quarter, Insider Monkey found that 50 were the bank's investors. The largest First Horizon Corporation (NYSE:FHN) shareholder in our database is Israel Englander's Millennium Management as it owns $170 million worth of shares.
Nu Holdings Ltd. (NYSE:NU) is a Brazilian digital bank that is well known for being one of the largest of its kind in the high growth South American country. To wit, investment bank Morgan Stanley added the stock to one of its top picks in 2024, despite the fact that the shares were already up by 104% in 2023.
During December 2023, 54 out of the 933 hedge funds surveyed by Insider Monkey had bought Nu Holdings Ltd. (NYSE:NU)'s shares. Warren Buffett's Berkshire Hathaway owned the biggest stake which was worth $892 million.
First Citizens BancShares, Inc. (NASDAQ:FCNCA) is a North Carolina based bank that offers loans, accounts, and other typical banking products and services. Analysts have priced in a 20% upside to its already expensive shares that are currently trading at $1,518.
For their Q4 2023 shareholdings, 54 out of the 933 hedge funds profiled by Insider Monkey had invested in the firm. First Citizens BancShares, Inc. (NASDAQ:FCNCA)'s largest hedge fund investor is Natixis Global Asset Management's Harris Associates due to its $710 million investment.
Bank of America Corporation (NYSE:BAC), First Citizens BancShares, Inc. (NASDAQ:FCNCA), JPMorgan Chase & Co. (NYSE:JPM), and Citigroup Inc. (NYSE:C) are some top hedge fund long term bank stock picks.
