In this piece, we will take a look at the 11 most profitable bank stocks to invest in. If you want to skip out on our introduction to the banking industry and the stock market, then head on over to 5 Most Profitable Bank Stocks To Invest In.
The banking industry has been at the forefront of financial news throughout 2023 as the industry faced a significant upheaval, marked by the occurrence of three of the largest bank failures in American history. Silicon Valley Bank, Signature Bank, and First Republic Bank all experienced collapses attributed to a devaluation of their asset portfolios. The Federal Reserve's decision to raise interest rates and tighten monetary policy triggered the flight of substantial uninsured deposits seeking safety and better returns elsewhere. There were concerns that this could lead to contagion affecting other segments of the banking industry. However, as of now, such an event hasn't occurred.
With that said, banking institutions are keeping their eyes peeled for the upcoming Federal Reserve meeting, which is anticipated to maintain the current interest rates. In addition, investors and analysts alike are closely monitoring the Fed's tone for clues about the potential timing of rate adjustments. Bolstered by a robust monthly jobs report from the Labor Department, which surpassed expectations for new job additions in November, along with this year's lowest core PCE increase, major US stock indices concluded another week with positive gains. This marks six consecutive weeks of growth, with the S&P 500 and Nasdaq Composite indices reaching their highest levels since early 2022 and closing 20.4% and 38.67% higher on December 8, respectively.
Anticipating a move by the Federal Reserve, The Goldman Sachs Group, Inc. (NYSE:GS) expects a 50 basis points reduction in interest rates next year, with the initial interest rate cut projected for the third quarter of 2024. Despite less optimistic outlooks from JPMorgan Chase & Co. (NYSE:JPM) and Morgan Stanley (NYSE:MS) in their 2024 reports, there are still bullish perspectives for the coming year. Bank of America Corp (NYSE:BAC), for instance, foresees the S&P 500 reaching 5,000 in 2024, asserting that "we are past maximum macro uncertainty," and stating that the market has absorbed a considerable amount of uncertainty and negative news.
In any case, the current situation where well-established banks with a longstanding presence in both the US and international markets are trading below their usual levels could serve as motivation for investors to consider allocating their funds to the banking sector. In light of this, the investing population looks towards bank stocks that can rake in a hefty profit. In that regard, some of the most profitable bank stocks to invest in include the likes of Bank of America Corp (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM), and Wells Fargo & Company (NYSE:WFC), among others listed below.
11 Most Profitable Bank Stocks To Invest In
A city skyline with multiple regional banks in the foreground.
Our Methodology
In curating our selection of the most profitable bank stocks t0 invest in, we extensively reviewed Insider Monkey’s Q3 2023 database to pinpoint industry leaders assessed by hedge fund sentiment. Following that, the shortlisted companies were ranked according to their trailing twelve month net income.
Fifth Third Bancorp (NASDAQ:FITB) is a major American bank holding company headquartered in Cincinnati, Ohio, with its principal subsidiary being Fifth Third Bank. Serving as one of the largest consumer banks in the Midwestern United States, Fifth Third caters to a diverse client base, including retail, small business, corporate, and investment clients.
On December 12, Fifth Third Bancorp (Nasdaq:FITB) announced a cash dividend of $0.35 per share for the fourth quarter of 2023, the same as the previous quarter. This dividend is scheduled to be paid on January 16, 2024, to shareholders of record as of December 29, 2023. This translates to a dividend yield of 4.33% as of December 12.
As of September 2023 end, 38 out of the 910 hedge funds surveyed by Insider Monkey had held a stake in the company. Fifth Third Bancorp (NASDAQ:FITB)’s largest hedge fund shareholder is Brandon Haley’s Holocene Advisors due to its $86.75 million stake.
Much like Bank of America Corp (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM), and Wells Fargo & Company (NYSE:WFC), Fifth Third Bancorp (NASDAQ:FITB) ranks as one of the most profitable bank stocks to invest in.
M&T Bank Corporation (NYSE:MTB) is a regional banking company headquartered in Buffalo, New York. As the bank holding company for Manufacturers and Traders Trust Company and Wilmington Trust, National Association, it provides a range of retail and commercial banking products.
M&T Bank Corporation (NYSE:MTB) reported earnings of $4.05 per share for the quarter ending in September 2023, exceeding expectations by 2.79%. The company also recorded revenues of $2.34 billion, compared to $2.24 billion in the same period the previous year. Notably, M&T Bank Corporation (NYSE:MTB) has surpassed consensus revenue estimates in each of the last four quarters.
Insider Monkey also took a look at 910 hedge fund holdings for 2023’s September quarter and found that 32 had bought and owned M&T Bank Corporation (NYSE:MTB)’s shares. The largest M&T Bank Corporation (NYSE:MTB) shareholder during the third quarter was Paul Marshall And Ian Wace’s Marshall Wace LLP as it owned 715,397 shares that were worth $90.46 million.
Here’s what The London Company said about M&T Bank Corporation (NYSE:MTB) in its first-quarter 2023 investor letter:
“M&T Bank Corporation (NYSE:MTB)- MTB underperformed, along with other regional banks, on the failures of Silicon Valley Bank and Signature Bank and fear of broader contagion. Importantly, MTB has neither the same kind of client concentration risk nor duration risk that impacted Silicon Valley Bank. Particularly with respect to duration risk, MTB was an outlier in its conservatism with respect to buying shorter-term securities in a very low rate environment. MTB does have exposure to commercial real estate, including office real estate. While we do expect some elevated credit losses in this portion of the loan portfolio, we note MTB has historically been an effective manager of risk, and we remain confident that management has behaved with appropriate caution.”
9. The Bank of New York Mellon Corporation (NYSE:BK)
Latest TTM Net Income: $3.4 billion
Number of Hedge Fund Holders: 11
BNY Mellon, officially known as The Bank of New York Mellon Corporation (NYSE:BK), is an American financial institution headquartered in New York City. The corporation provides a range of financial services, including investment management, investment services, and wealth management.
The Bank of New York Mellon Corporation (NYSE:BK) exceeded Wall Street expectations for third-quarter profit, benefiting from U.S. Federal Reserve rate hikes that boosted the income derived from loans. BNY Mellon's net interest revenue for the quarter surged nearly 10% to $1.02 billion, compared to $926 million the previous year. On an adjusted basis, the bank posted a profit of $1.27 per share in the third quarter, surpassing analysts' average estimate of $1.15 per share. Total revenue increased by 2% to $4.4 billion year-over-year, and assets under custody or administration (AUC/A) climbed 8.3% to $45.7 trillion, primarily driven by higher market values and client inflows.
As of September 2023 end, 51 out of the 910 hedge funds surveyed by Insider Monkey had held a stake in the company. The Bank of New York Mellon Corporation (NYSE:BK)’s largest hedge fund shareholder is Jean-Marie Eveillard’s First Eagle Investment Management due to its $692 million stake.
U.S. Bancorp (NYSE:USB), headquartered in Minneapolis, Minnesota, and incorporated in Delaware, is an American bank holding company. It serves as the parent company of U.S. Bank National Association and stands as one of the largest banking institution in the United States.
U.S. Bancorp (NYSE:USB) surpassed expectations for third-quarter profit, with increased interest income from loans mitigating the impact of larger credit-loss provisions. Net interest income, representing the disparity between earnings from lending and deposit payouts, rose by 10.7% to reach $4.27 billion for the quarter ending on September 30.
Insider Monkey also took a look at 910 hedge fund holdings for 2023’s September quarter and found that 29 had bought and owned U.S. Bancorp (NYSE:USB)’s shares. The largest U.S. Bancorp (NYSE:USB) shareholder during the third quarter was Jean-Marie Eveillard’s First Eagle Investment Management as it owned 8.9 million shares that were worth $295 million.
Here is what Davis New York Venture Fund has to say about U.S. Bancorp (NYSE:USB) in its Q3 2023 investor letter:
“In spring 2023, a number of high-profile regional banks, none of which we owned, collapsed over the course of a few weeks. In contrast, the select, large banks we own, including U.S. Bancorp, actually saw deposit inflows and increasing profits, reinforcing our thesis that high-quality financial services companies remain among the most misunderstood and attractive sectors of the market. This stress test models a dramatic recession—one meaningfully worse than the great financial crisis of 2008-2009. It includes a 3.5% decline in gross domestic product, a 10% unemployment rate, a 37% decline in residential real estate, a 40% decline in commercial real estate and a 55% decline in the stock market. The resilience and strength required to weather such an economic storm combined with proven economies of scale in branding and technology should drive DNYVF market share gains and growth for years to come. Trading at some of the lowest valuations in the market, our financial sector holdings—such as U.S. Bancorp, deserve to be revalued upwards over time. In the meantime, increasing dividends and a shrinking share base create value while we wait.”
The PNC Financial Services Group, Inc. (NYSE:PNC) is a bank holding company and financial services corporation headquartered in Pittsburgh, Pennsylvania. Through its banking subsidiary, PNC Bank, the company operates in 27 states and the District of Columbia. Recently, The PNC Financial Services Group, Inc. (NYSE:PNC) acquired a portfolio of capital commitments facilities from Signature Bridge Bank, N.A., totaling approximately $16.6 billion in commitments.
As of September 2023, 45 among the 910 hedge funds polled by Insider Monkey had bought the bank’s shares. The PNC Financial Services Group, Inc. (NYSE:PNC)’s largest shareholder out of these is Dmitry Balyasny Balyasny Asset Management due to a $169.3 million stake.
Artisan Value Fund made the following comment about The PNC Financial Services Group, Inc. (NYSE:PNC) in its Q1 2023 investor letter:
“We are taking advantage of the current weakness in bank stocks. In Q1, we purchased The PNC Financial Services Group, Inc. (NYSE:PNC) and US Bancorp. These are banks we have known for years. They are well-managed and have solid capital positions and liquidity. At the end of Q1, we had an ~7% weighting in banks consisting of PNC, US Bancorp and Bank of America. All 3 are among the 10 largest US banks. We believe the range of probabilities and long-term outcomes are tilted in our favor at current prices but are proceeding with caution for several reasons. First, while we believe deposit-runs have likely burned themselves out, there is a non-zero risk these runs spread wider than our base case. Second, we expect more regulation in coming years which will increase the cost of doing business, potentially in exchange for higher FDIC limits. Third, at the very least we expect banks to cease buybacks for the rest of the year to build up liquidity and capital ratios. There is an increasingly more likely outcome that banks issue equity capital and preferred stock once markets stabilize. Fourth, with the banking system in shock, it will likely retrench, which will constrict capital to the US economy. Coupled with the “long and variable lags” of Fed policy, this will slow US economic growth beyond what private credit markets can make up.”
The Goldman Sachs Group, Inc. (NYSE:GS) stands as a prominent global investment banking, securities, and investment management firm, offering a comprehensive array of financial services to a substantial and diverse client base encompassing corporations, financial institutions, governments, and individuals.
During the third quarter of 2023, The Goldman Sachs Group, Inc. (NYSE:GS) distributed $937 million to its shareholders in the form of dividends. Presently, the company issues a quarterly dividend of $2.75 per share, resulting in a dividend yield of 3.08%, as of December 12.
During September 2023, 68 out of the 910 hedge funds surveyed by Insider Monkey were the bank’s investors. The Goldman Sachs Group, Inc. (NYSE:GS)’s largest hedge fund shareholder is Ken Fisher’s Fisher Asset Management as it owns 5.3 million shares that are worth $1.7 billion.
Ariel Focus Fund made the following comment about The Goldman Sachs Group, Inc. (NYSE:GS) in its third 2023 investor letter:
“Additionally, global investment bank, The Goldman Sachs Group, Inc. (NYSE:GS), increased in the period. Although the company posted mixed earnings results and lowered full-year guidance, GS continues to successfully execute on its strategic initiatives to improve the overall return of the company. It is right sizing headcount and narrowing its ambitions in consumer strategy through divestitures and an enhanced focus on driving profitability in Platform Solutions. GS also noted signs of a recovery in a few investment banking areas, including equity capital markets and mergers & acquisitions. With the stock currently trading near book value, management also announced intentions to return more capital to shareholders via buybacks. Looking ahead, we view the near and long-term outlook for Goldman as attractive at current levels, given favorable business trends, continued positive momentum on strategic initiatives and active expense/capital management programs.”
The Goldman Sachs Group, Inc. (NYSE:GS) joins the ranks of Bank of America Corp (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM), and Wells Fargo & Company (NYSE:WFC) as one of the most profitable bank stocks to invest in.