When domestic market trends are uncertain, international bank stocks are solid investment options because they enable investors to ride favorable macroeconomic trends in their home economies. They also help diversify one’s portfolio and mitigate overall portfolio risk.
The U.S. economy is currently facing a number of headwinds, including high inflation, supply chain issues, and an increasing number of COVID-19 omicron cases. Although the Fed has announced measures such as reducing its bond purchases and increasing benchmark interest rates three times this year to control inflation, the economy is expected to struggle with a severe supply-demand imbalance in the labor market and soaring real estate prices. Goldman Sachs Group, Inc.’s (GS) chief economist Jan Hatzius said, “I would say growth is clearly slowing. Obviously, we are past the peak rate, but it’s a relatively gradual slowdown.” Goldman has cut its 2022 GDP growth projection for the U.S. economy to 4% from 4.4% previously.
Given this backdrop, we think it could be wise to diversify one’s portfolio by adding fundamentally strong international bank stocks HSBC Holdings plc (HSBC), Mitsubishi UFJ Financial Group, Inc. (MUFG), UBS Group AG (UBS), and Banco Santander, S.A. (SAN).
HSBC Holdings plc (HSBC)
Headquartered in London, HSBC provides banking and financial services. It manages its products and services through three businesses: Wealth and Personal Banking, which includes retail banking wealth and asset management and insurance; Commercial Banking, which includes credit lending, treasury management, and others; and Global Banking and Markets, which support government, corporate and institutional clients, and private investors.
On Dec. 30, 2021, HSBC announced that it had received regulatory approval from the China Banking and Insurance Regulatory Commission to take full ownership of its life insurance joint venture, HSBC Life China. The acquisition is part of HSBC’s non-core banking services business expansion.
HSBC’s revenue for the third quarter, ended Sept. 30, 2021, increased 0.7% year-over-year to $12.01 billion. The company’s profit after tax rose 108% year-over-year to $4.24 billion. Also, its EPS came in at $0.17, representing a 142.8% increase year-over-year.
Analysts expect HSBC’s EPS for its fiscal 2021 to increase 102% year-over-year to $3.11. The company’s revenue for fiscal 2022 is expected to increase 5.5% year-over-year to $52.79 billion. Over the past six months, the stock has gained 21.4% in price to close the last trading session at $33.53.
HSBC’s POWR Ratings reflect solid prospects. The company has an overall B rating, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
It has an A grade for Momentum and a B grade for Growth, Stability, and Sentiment. It is ranked #20 of 98 stocks in the B-rated Foreign Banks industry. Click here to see the other ratings of HSBC for Value and Quality.
Mitsubishi UFJ Financial Group, Inc. (MUFG)
Headquartered in Tokyo, MUFG is Japan’s largest bank. It operates through its Corporate & Retail segment; Corporate Banking segment; Global CIB segment; Global Commercial Banking segment, which includes providing financial services to individuals, small- and medium-sized businesses; Trustee segment; Market segment; other segment. On Sept. 21, 2021, MUFG announced that it is leaving U.S. retail banking after selling f MUFG Union Bank (MUB) to U.S. Bancorp (USB) for $8 billion, of which it will receive $5.5 billion cash and $2.50 billion in USB equity. This deal will enable MUFG to focus on corporate and investment banking in the U.S. through its other units and partnership with Morgan Stanley (MS).
For six months ended Sept. 30, 2021, MUFG’s ordinary profits increased 395.7% year-over-year to ¥986 billion ($8.66 billion). The company’s profits attributable to the owners of the parent increased 380.6% year-over-year to ¥781.40 billion ($6.86 billion). In addition, its ROE came in at 10.9%, compared to 5.8% in the year-ago period.
For its fiscal year ending March 31, 2023, MUFG’s revenue is expected to increase 2.6% year-over-year to $16.77 billion. Over the past year, the stock has gained 27.4% in price to close the last trading session at $5.95.
MUFG’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which translates to a Buy in our proprietary rating system.
It has an A grade for Momentum and a B grade for Stability and Sentiment. It is ranked #11 in the Foreign Banks industry. To see the additional ratings of MUFG for Growth, Value, and Quality, click here.
UBS Group AG (UBS)
Headquartered in Zurich, Switzerland, UBS provides financial advice and solutions to private, institutional, and corporate clients worldwide. The company’s business segments include Wealth Management; Wealth Management Americas; Personal & Corporate Banking; Asset Management; and the Investment Bank.
On Oct. 26, 2021, UBS announced its plans to build a digitally scalable advice model for affluent clients in the Americas with up to $2 million to invest. UBS’ digital plans are part of its 2025 strategic vision.
UBS’ operating income increased 2.1% year-over-year to $9.12 billion for the third quarter, ended Sept.30, 2021. The company’s net profit rose 8.8% year-over-year to $2.27 billion. Also, its EPS increased 12.5% year-over-year to $0.63.
Analysts expect UBS’ EPS for its fiscal 2022 to increase 2.8% year-over-year to $1.81. The company’s revenue for fiscal 2021 is expected to increase 6.4% year-over-year to $34.46 billion. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 24.1% in price over the past year to close the last trading session at $18.47.
UBS’ POWR Ratings reflect solid prospects. The company has an overall B rating, which translates to a Buy in our proprietary rating system.
Banco Santander, S.A. (SAN)
Headquartered in Madrid, Spain, SAN provides retail and commercial banking products and services to individuals, small- and medium-sized enterprises, and large companies worldwide. It offers demand and time deposits, current and savings accounts, mortgages, consumer finance, and cash management services.
On Dec.15, 2021, SAN announced that it would invest $6 billion between 2022 - 2024 to promote the digital transformation of its Latin American operations. The transformation will allow SAN to cater to the needs of the fast-growing Latin American markets.
For its fiscal third quarter, ended Sept. 30, 2021, SAN’s net interest income increased 2.6% sequentially to EUR8.45 billion ($9.56 billion). The company’s attributable profit increased 5.2% sequentially to EUR2.17 billion ($2.45 billion). And its EPS came in at EUR0.116, up 4.4% sequentially.
For its fiscal 2021, analysts expect SAN’s EPS to increase 38.7% year-over-year to $0.43. Its revenue for fiscal 2022 is expected to increase 3.6% year-over-year to $52.95 billion. Over the past year, the stock has gained 8% in price to close the last trading session at $3.39.
SAN’s POWR Ratings reflect strong prospects. The company has an overall B rating, which translates to a Buy in our proprietary rating system.
It has an A grade for Momentum and a B grade for Growth, Value, and Stability. Within the Foreign Banks industry, it is ranked first out of 98 stocks. To see the ratings of SAN for Sentiment and Quality, click here.
HSBC shares rose $0.75 (+2.24%) in premarket trading Tuesday. Year-to-date, HSBC has gained 13.60%, versus a -8.79% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.4 International Bank Stocks to Buy to Diversify Your Portfolio appeared first on StockNews.com