In this article, we discuss 12 best performing bank stocks in 2022. If you want to see more stocks in this selection, check out 5 Best Performing Bank Stocks in 2022.
2022 has brought high inflation which has not been seen in 40 years, leading the Federal Reserve to tighten monetary policy at the fastest pace in three decades. The Fed’s aggressive policies have resulted in skyrocketing interest rates, which has significantly increased earning-asset yields and margins for many financial institutions. However, the recession fears have put a damper on economic growth forecasts and banks are concerned about payment defaults and higher loan losses.
Banks will need to transform their business models to navigate the presently volatile macro environment and ensure long-term growth and profitability. 2022 was a year ripe with uncertainties, including inflation, war, rising interest rates, and supply chain disruption, and it put an end to more than a decade of relative stability in the banking sector. Banks continue to trade at a large discount to other sectors, which suggests that over half of the banks in the world earn less than their cost of equity.
As per McKinsey, bank profitability was at a 14-year high in 2022, with expected return on equity between 11.5% and 12.5%. Global banking revenue increased by $345 billion. This growth was driven by a significant boost in net margins, as interest rates climbed after remaining stagnant for years. For now, the banking system globally is exhibiting Tier 1 capital ratios between 14% and 15% – the highest on record. The improvement in margins accounted for 60% of the revenue gains.
To benefit from the boom in the banking industry, investors can look into regional banks which are outperforming benchmarks. (see Top 25 Regional Bank Stocks) Those investors who want to diversify their equity portfolios can also seek out European bank stocks. (see 9 Best European Bank Stocks To Invest In) While the likes of JPMorgan Chase & Co. (NYSE:JPM), Bank of America Corporation (NYSE:BAC), and Citigroup Inc. (NYSE:C) are typically the go-to choices for investors who want exposure to the banking sector, we discuss the best performing bank stocks this year in this article.
Our Methodology
We selected the bank stocks that offer positive year-to-date share price gains as of December 28. We have assessed the hedge fund sentiment from Insider Monkey’s database of 920 elite hedge funds tracked as of the end of the third quarter of 2022. The list is arranged according to the number of hedge fund holders in each firm. This means our list demonstrates the best performing bank stocks to buy according to hedge funds. We also discussed analyst coverage, business fundamentals, and the future share catalysts associated with these firms.