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Discover the Highest Growth Global Bank Stocks

Reading time: 8 minutes

What are the highest growth global bank stocks? This article will provide you with a detailed breakdown of the top bank stocks you should be monitoring, with options on which bank stocks might be worth investing in. We'll look at how world events such as Brexit have made an impact on these stocks, and much more!

Best Bank Stocks For Investment

Despite experiencing some wild volatility in the final quarter of 2018, the US stock market has been enjoying an extended bull run in the years following the end of the financial crisis. In late September 2018, the S&P 500 index closed at a then-all-time high of 2930.75, having risen all the way from a close of 682.55 back in March 2009. That's a remarkable increase in value of 329% in just under a decade.

As tends to happen in such circumstances, much focus has gone to growth stocks, with rapid increases in tech stocks, such as Netflix, Amazon, Facebook and Tesla, gaining increased investor attention. The rise to record highs for the major stock index benchmarks has also been fuelled by positive moves in more traditional investment sectors though, and perhaps this has been a little overlooked. This article is going to look at the performance of some well-known names from the banking sector, in order to provide a rough guide to the best bank stocks.

The Top 5 US Bank Stocks

As the US banking sector was particularly hit hard during the financial crisis, it recovered at an even sharper pace compared with the wider market. The large banks make money these days in a myriad of ways. These include such areas as financial services to consumers and small businesses, asset management, and financial transaction processing — and the US has created a conducive environment in which to conduct such business, thanks to the accommodative monetary policy employed by the Federal Reserve, in the wake of the financial crisis.

We can see this reflected in the share-price performance of the large investment banks. For example, the Dow Jones US Banks Index (which is designed to gauge the performance of US banking-sector companies) rose from 83.34 in March 2009, to 509.87 by late January 2018. That's an incredible gain of more than 510%.

S&P Dow Jones Indices

Source: S&P Dow Jones Indices - Dow Jones US Banks Index - Data Range: October 2008 - November 2018 - Accessed November 16 2018, 9:30am EET

By way of comparison, the S&P 500 Financials Index climbed slightly less over the same period, making a gain of just under 500%. This rough comparison suggests that if you are searching for the best financial stocks over the period, it might be a good idea to at least cast an eye over the banking sector.

S&P Dow Jones Indices

Source: S&P Dow Jones Indices - S&P 500 Financials Index - Data Range: October 2008 - November 2018 - Accessed November 16 2018, 9:30am EET

So let's take a look at some of the big guns in that index, to help us explore which are the best US bank stocks. The bank stocks with the highest weight in that particular banks index are, unsurprisingly, some of the giants of the US banking sector.

These include:

  • JP Morgan
  • Wells Fargo
  • Citigroup
  • Bank of America
  • US Bancorp

Of course, missing from the list of banks above is one other essential name that needs to be in our shortlist of giant-cap US banking stocks — namely, Goldman Sachs. Let's look at some metrics for these companies:

Bank

5-year Share Price Growth

Market Cap

P/E Ratio

Dividend Yield

JP Morgan

142%

$341.06 bn

14.25

2.31%

Wells Fargo

74%

$275.90 bn

13.7

2.81%

Citigroup

80%

$206.09 bn

15.08

1.69%

Bank of America

149%

$276.53 bn

15.81

1.83%

US Bancorp

64%

$90.63 bn

16.36

2.21%

Goldman Sachs

94%

$95.18 bn

12.87

1.22%

Source: Market capitalisation - Price to earnings ratio and dividend yield: Reuters - Accessed November 16 2018, 9:30am EET - Share price growth based on comparison of closing share prices from 2 January 2018 to 2 January 2018 - Source: NASDAQ.com - Accessed November 16 2018, 9:30am EET.

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US Regional Bank Stocks

Of course, it's not just the banking giants that have enjoyed healthy growth in their share prices. If we dig into the US banks with smaller market caps, and look at the best regional bank stocks, there are impressive gains there as well. For example, if we focus on Southwest regional banks, First Financial Bankshares (ticker FFIN) has seen its share price grow more than 100% in the same five-year period. Here's how the same metrics (as seen above) look for First Financial Bankshares, compared with a few of its peers from the same region:

Bank

5-year Share Price Growth

Market Cap

P/E Ratio

Dividend Yield

First Financial Bankshares

118%

$4.33 bn

30.73

1.31%

BOK Financial

66%

$6.17 bn

13.2


2.36%

UMB Financial

60%

$3.25 bn

14.7

1.84%

Cullen/Frost Banks

71%

$6.43 bn

15.21

2.66%

Source: Market capitalisation - Price to earnings ratio and dividend yield: Reuters - Accessed November 16 2018, 9:30am EET - Share price growth based on comparison of closing share prices from 2 January 2018 to 2 January 2018 - Source: NASDAQ.com, accessed November 16 2018, 9:30am EET.

UK Bank Stocks and the Brexit Effect

It has been a different story for British bank stocks though. While the US economy has been on a steady upward march, the UK economic picture has been complicated by the looming prospect of Brexit. While the direct economic impact so far is debatable, the uncertainty of the whole situation has served to make the UK a less attractive proposition.

London has long enjoyed a position as the financial centre of Europe, and Brexit poses the possibility of undermining this status quo — for example, rating agency Moodys has forecast that slower economic growth resulting from Brexit uncertainty will lead to a deterioration in operating conditions for the UK banking sector. We can see evidence of this when we look at the performance of some leading British bank stocks, over the same period of comparison that we used when looking at the US banking stocks.

Bank

5-year Change in Share Price

Lloyds Banking Group

+36%

HSBC

+15%

Royal Bank of Scotland

-17%

Barclays

-20%

Source: Share price growth based on comparison of closing share prices from 2 January 2018 to 2 January 2018 - Source: NASDAQ.com, accessed November 16 2018, 9:30am EET.

As we can see, stocks in Royal Bank of Scotland (RBS) and Barclays have actually declined over the period, and the gains of Lloyds and HSBC are lacklustre, when compared to those we previously saw for the US banks. This goes to show how important it is to consider the specific environment of the economic region in question when investing. Through a period of global growth, there has been a marked difference in share-price performance between the big US banks and the big UK banks.

Simple Exposure to Banking Stocks

Of course, if you simply want to gain exposure to the banking sector as a whole, rather than trying to pick individual stocks, a convenient way to do so is by investing in a bank stock ETF. For example, the SPDR KBW Bank ETF is a fund designed to mimic the performance of the KBW Bank Index, an index of geographically-diverse banking companies listed on US stock markets.

A Final Word on Banking Stocks

Though we have looked at some big gains made by some key banking stocks in recent years, past performance provides no guarantee of what the future may hold. The global economy has benefited, over an extended period of time, from a low-interest environment, but the Federal Reserve has repeatedly signalled its intention to normalise monetary policy.

Higher interest rates may create headwinds in certain areas for the banking sector, or may possibly provide new opportunities in others. If you are interested in investing in such stocks, why not open an investing account with Admiral Markets? and begin building your investment portfolio today!

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Disclaimer: This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

Risk Warning

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