Best Bank Stocks

Review and Analysis

Overview

Once highly sought after, the stocks of banks and other companies in the financials sector took a huge blow following the recent financial crisis, leading many investors to lose their trust investing in them. This coupled with low interest rates in the banking sector, has put many investors off from buying bank stocks, even in the world’s biggest and most long-established banks.

Despite the gloom realities and recent past experiences, the banking sector seems to make a gradual comeback and be on a recovery stage, aided by rising interest rates and new consumer-friendly banking products being launched, which gradually push banks back into profitability. Whether bank stocks should be in your portfolio as an investor depends on your specific preferences and aims as an investor. Perhaps bank stocks are not your best bet if you are after high growth, but if longer-term value and income top your list, then the financial sector and bank shares, in particular, do merit a closer look.

What Are Bank Stocks?

Banks stocks are the shares of banks, which are some of the oldest institutions in the world, with some big players being in business for more than a hundred years. Contrary to your home piggy bank, modern-day banks do much more with your money than simply holding it. By loaning money to creditworthy borrowers, banks give borrowers access to funds they otherwise could not have obtained, and by charging interest on each loan they issue, banks earn the majority of their profits. Since banks are not required to actually hold large amounts of capital, compared to their liabilities, all systemic and other large banks are required by watchdogs to be undergoing stress tests on a regular basis to ensure they can effectively respond to any catastrophic scenario and crisis that might arise.

By the end of the guide, you should know the following:

• If Bank stocks is a good or a bad investment.
• How to buy Bank stocks.
• Where to buy Bank stocks.
• Which Bank share is best to buy now?.
• Bank stock price prediction: Where Will Bank stock Be in the next few Years?

Where Can You Buy Bank stocks

There are several online sites and platforms where people from across the globe can buy Bank at good exchange rates and with low or no transaction fees. To aid your quest we have comprised a list of some of the most popular Stock Trading platforms to buy Bank sector's shares from and your strongly advised to consult this list before making your first purchase of or investment in Bank industry.

Features to Look in Bank stocks

When considering investing in bank stocks, keep in mind that not all banks are the same, so when picking the best bank for your investment portfolio there are several factors you need to consider in order to make the most suitable and best possible choice. Here are the most important factors you should be looking at, before decided in which bank stock you should be investing:

• Price-to-book value. The price-to-book value is a metric that reveals how a company stock’s price compares against the liquidation value of its assets. Seasoned investors are aware that low price-to-book ratios are usually indicative of a stock being undervalued and thus holding potential for a rise in its price. The price to book values for bank stocks is usually below the average. Thus, when thinking of investing in the stock of a large bank, look for a price-to-book ratio between 1 and 2, while when evaluating smaller banks seek out a price-to-book ratio under 1.
• High-dividend yield. Banks are very popular amongst investors because of the high income they can offer them through dividends. Unlike other types of companies, banks do not usually spend high amounts on investing in research and development and thus their shareholders receive most of the profits being made in the form of dividends. Check out the dividend yield offered by a bank over the years and if you find that to be growing, then it means that its profits are growing too. Increased profits and increased dividend yields mean extra income for shareholders and investors.
• Return On Assets (ROA). The Return on assets (ROA), which is derived through the division of the net income by the total assets, is preferred as a comparison metric for banks rather than the return on equity (ROE), because ROA makes comparisons between companies in the same sector easier and more credible. A ROA of over 1% is considered very good for firms in the banking industry.

Future Outlook for Bank stocks

An old favorite for many investors, bank stocks are now a beaten-down sector, but this is perhaps exactly why you should perhaps be thinking of investing in bank stocks today. As there are still doubts and mistrust on behalf of investors towards banks, the recovery process from the 2008 crisis has been slow. However, a future rise in interest rates, as world economies restart following the pandemic, may well catapult bank stocks back to their previous status, so scooping up a few bank stock deals right now, might not be a bad idea at all.

Risks of Investing in Bank stocks

Tips on How to Invest in Bank stocks and Make a Profit

There is no guarantee that you will make a profit when you invest in Bank. However, to give yourself the best chance possible we have hand-picked the three most valuable such strategies, which you can find below:

• Tip 1: Set your own specific Financial Goals
• Tip 2: Dollar-Cost Average Your Bank Investments
• Tip 3: Diversify Your Bank Investment

Overall Conclusion – Final Thoughts

In this guide, the aim wasn’t only to answer simple questions like “how to buy stocks of the Bank sector?” or “where to buy Bank stocks?”. Instead, the goal was to equip you with the relevant knowledge and insight to be able to see and understand the bigger picture as well as make your Bank stocks investment journey as successful and as profitable as possible!