4 international banking stocks to buy to diversify your portfolio
When domestic market trends are uncertain, stocks of international banks are strong investment options as they allow investors to take advantage of favorable macroeconomic trends in their home economy. 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 a growing number of omicron COVID-19 cases. Although the Fed has announced measures such as reducing its bond purchases and raising benchmark interest rates three times this year to control inflation, the economy is expected to grapple with a severe imbalance between supply and demand in the labor market and soaring real estate prices. Goldman Sachs Group, Inc. (GS) Chief Economist Jan Hatzius said: “I would say that growth is clearly slowing down. Obviously, we have exceeded the peak rate, but it is a relatively gradual slowdown. Goldman cut its 2022 GDP growth projection for the US economy at 4% against 4.4% previously.
Against this backdrop, we think it might make sense to diversify its portfolio by adding fundamentally strong international banking stocks HSBC Holdings plc (HSBC), Mitsubishi UFJ Financial Group, Inc. (MUFG), UBS Group AG (UBS), and Banco Santander, SA (SAN).
HSBC Holdings plc (HSBC)
Based 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, cash management and others; and Global Banking and Markets, which supports government, corporate and institutional clients, as well as private investors.
On December 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 the expansion of HSBC’s non-core banking business.
HSBC’s revenue for the third quarter, ended September 30, 2021, increased 0.7% year-on-year to $12.01 billion. The company’s after-tax profit rose 108% year-over-year to $4.24 billion. Additionally, its EPS came in at $0.17, representing a 142.8% year-over-year increase.
Analysts expect HSBC PES for its 2021 fiscal year to rise 102% year-over-year to $3.11. The company’s fiscal 2022 revenue is expected to grow 5.5% year-over-year to $52.79 billion. Over the past six months, the stock price has gained 21.4% to close the last trading session at $33.53.
HSBC POWR Rankings reflect strong prospects. The company has an overall rating of B, which translates to a buy in our proprietary rating system. POWR ratings rate stocks on 118 separate factors, each with its own weighting.
It has an A rating for Momentum and a B rating for Growth, Stability and Sentiment. It is ranked No. 20 out of 98 stocks in the B rating Foreign banks industry. Click here to see HSBC’s other ratings for value and quality.
Mitsubishi UFJ Financial Group, Inc. (MUFG)
Based in Tokyo, MUFG is Japan’s largest bank. It operates through its Corporate & Retail segment; Corporate Banking sector; global IPC segment; the Global Commercial Banking segment, which includes the provision of financial services to individuals, small and medium enterprises; Trust segment; Market segment; other segment. On September 21, 2021, MUFG announced that it was leaving US retail banking after selling f MUFG Union Bank (MUB) to US Bancorp (USB) for $8 billion, including $5.5 billion in cash and $2.50 billion in USB stock. This agreement will allow MUFG to focus on corporate and investment banking in the United States through its other units and its partnership with Morgan Stanley (MRS).
For the six months ended September 30, 2021, MUFG’s ordinary profits increased 395.7% year-on-year to 986 billion yen ($8.66 billion). The company’s profits attributable to parent company owners rose 380.6% year-on-year to 781.40 billion yen ($6.86 billion). Moreover, its ROE stood at 10.9%, compared to 5.8% a year ago.
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 price has gained 27.4% to close the last trading session at $5.95.
MUFG’s strong fundamentals are reflected in its POWR ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A rating for Momentum and a B rating for Stability and Sentiment. It is ranked #11 in the Foreign banks industry. To see MUFG’s additional ratings for growth, value and quality, Click here.
UBS Group AG (UBS)
Based in Zurich, Switzerland, UBS provides financial advice and solutions to private, institutional and corporate clients worldwide. The Company’s segments include Wealth Management; Wealth Management Americas; Personal and corporate banking services; Asset Management; and the Investment Bank.
On October 26, 2021, UBS announced plans to create a digitally scalable advisory model for affluent clients in the Americas with up to $2 million to invest. UBS’s digital plans are part of its 2025 strategic vision.
UBS’s operating profit increased 2.1% year-on-year to $9.12 billion in the third quarter ended September 30, 2021. The company’s net profit increased 8.8% year-on-year annual to reach 2.27 billion dollars. Additionally, its EPS rose 12.5% year-over-year to $0.63.
Analysts expect UBS’s EPS for its fiscal year 2022 to rise 2.8% year-over-year to $1.81. The company’s fiscal 2021 revenue is expected to grow 6.4% year-over-year to $34.46 billion. It has exceeded street EPS estimates in each of the past four quarters. The stock has gained 24.1% in price over the past year to close last trading session at $18.47.
UBS’s POWR ratings reflect a strong outlook. The company has an overall rating of B, which translates to a buy in our proprietary rating system.
It has an A rating for stability and sentiment and a B rating for value. In the Foreign banks the industry, it is ranked #2. Click here to see other UBS ratings for growth, momentum and quality.
Santander Bank, SA (SAN)
Based in Madrid, Spain, SAN provides retail and commercial banking products and services to individuals, small and medium-sized businesses and large corporations worldwide. It offers demand and term deposits, current and savings accounts, mortgages, consumer credit and cash management services.
On December 15, 2021, SAN announced that it would invest $6 billion between 2022 and 2024 to promote the digital transformation of its operations in Latin America. The transformation will allow SAN to meet the needs of fast-growing Latin American markets.
For its fiscal third quarter, ended Sept. 30, 2021, SAN’s net interest income increased 2.6% sequentially to €8.45 billion ($9.56 billion). The company’s attributable profit rose 5.2% sequentially to 2.17 billion euros ($2.45 billion). And its EPS was EUR 0.116, up 4.4% sequentially.
For its 2021 fiscal year, analysts expect SAN’s EPS to rise 38.7% year-over-year to $0.43. Its fiscal 2022 revenue is expected to grow 3.6% year-over-year to $52.95 billion. Over the past year, the stock price has gained 8% to close the last trading session at $3.39.
SAN’s POWR ratings reflect a strong outlook. The company has an overall rating of B, which translates to a buy in our proprietary rating system.
It has an A rating for Momentum and a B rating for Growth, Value and Stability. Within the Foreign banks industry, it is ranked first out of 98 stocks. To see SAN’s ratings for sentiment and quality, Click here.
HSBC shares were up $0.75 (+2.24%) in premarket trading on Tuesday. Year-to-date, HSBC has gained 13.60%, compared to a -8.79% rise in the benchmark S&P 500 over the same period.
About the Author: Dipanjan Banchur
Ever since he was in elementary school, Dipanjan had been interested in the stock market. This enabled him to obtain a master’s degree in finance and accounting. Currently, as an investment analyst and financial journalist, Dipanjan is particularly interested in reading and analyzing emerging trends in financial markets. Following…