11 Best Diversified Bank Stocks to Invest In
In This Article:
In this article, we discuss the 11 best diversified bank stocks to invest in. If you want to skip our detailed analysis of these stocks, go directly to 5 Best Diversified Bank Stocks to Invest In.
The coming months could prove to be challenging for banking stocks as the central bank in the United States considers bringing down interest rates in light of cooling inflation trends. Interest rates had jumped to record highs in the past two years because of rising prices as a result of post-pandemic demand pressures. According to estimates by the International Monetary Fund, global inflation is expected to drop to 5.2% in 2024, from a high of 8.7% in 2022. The world economy will likely grow by 3% this year, the fund forecasts.
Projections by the Federal Reserve indicate that the federal funds rate in the United States is expected to remain high at or above 550 basis points in the early part of 2024 but may drop to between 450 and 500 basis points in the second half of the year. Tightening policies by central banks around the world will limit money supplies. Research firm Deloitte claims that such a backdrop will create the conditions for divergent and sporadic economic growth, especially in the banking and financial sectors.
In the past few years, some of the best diversified banking stocks like JPMorgan Chase & Co. (NYSE:JPM), Bank of America Corporation (NYSE:BAC), and Citigroup Inc. (NYSE:C) posted large net interest income gains as a result of high rates. In 2022, banks in the US and Canada posted an 18% year-on-year increase in net interest income. Banks in Europe reported an 11% year-on-year increase in net interest income in the same year. High deposit costs are likely to remain a key area for concern in the banking world even as interest rates drop later this year.
In this overall environment, investors with banking stocks in their portfolios would be well-served by banking firms that have diversified sources of income. In mid-January, Jane Fraser, the CEO of Citigroup Inc. (NYSE:C), highlighted during the fourth quarter earnings call some of the steps that her company was taking to diversify the business and keep pace with the rate of change in the finance world, stressing that realizing the synergies between the five businesses of the firm was one of the key drivers to achieving medium-term revenue targets.
“We grew our tangible book value per share by 6% to $86.19 and we returned $6 billion in capital to our shareholders in the form of common dividends and share buybacks. We remain committed to continuing to return capital to investors through both of these channels. As I reflect on the year, I also want to note that we were a source of strength for the system and for clients during a volatile period for the banking sector and geopolitically and I’m very proud of how our people around the world performed during challenging times. 2024 looks to be similar to 2023 in terms of the macro environment with moderating rates and inflation. We expect to see growth slowing globally with the US well positioned to withstand a run-of-the-mill recession should one materialize. With a strong balance sheet, ample liquidity and diligent risk management we are well positioned to support our clients through whatever environment comes to path. Moreover, we think environments like these play to our strengths, given how far we are down the path of our simplification and divestitures. 2024 will be a turning point as we will be able to completely focus on the performance of our five businesses and our transformation. I recognize the importance of this year and I am highly confident that we will see the benefits of the actions we’ve taken through the momentum of our businesses. Backed by investments in key products we believe we can continue to grow revenues ex-divestitures by 4% to 5% over the medium term. Overall, we remain confident in our ability to adapt to the evolving capital and macro environment to reach our medium-term return targets and return capital to our shareholders whilst continuing the investments needed in our information.”
