One of the world’s leading financial institutions, Bank of America Corporation (BAC), declared a $0.21 quarterly dividend per share, representing a 17% increase from the prior quarter, payable on September 24. The company also launched the Bank of America Unlimited Cash Rewards credit card on July 19, allowing clients to earn unlimited 1.5% cash back on all purchases.
However, BAC stock has declined 3.3% over the past three months and 8.4% over the past month to close yesterday’s trading session at $38.13. With BAC viewed as the most exposed to rates among large U.S. banks, the company continues to be impacted by the low-interest-rate environment. In addition, its Merrill Lynch unit needs to pay nearly $11.7 million to resolve claims that it overcharged customers who invested in unit investment trusts. Consequently, the stock looks overvalued at its current price level. In terms of forward P/S and P/B, its respective 3.69x and 1.26x are higher than the 3.17x and 1.14x industry averages. So, we think it’s wise to wait for a better entry point in the stock.
However, according to Globe Newswire, the global financial services market is expected to grow at a 9.9% CAGR of 9.9% to hit $22.5 trillion this year. So, it could be wise to bet on quality foreign financial companies Banco Santander, S.A. (SAN), Barclays PLC (BCS), and Deutsche Bank Aktiengesellschaft (DB) that are well-positioned to capitalize on the industry’s recovery.
Banco Santander, S.A. (SAN)
Headquartered in Madrid, Spain, SAN operates through 11,236 branches and provides various retail and commercial banking products and services to individuals, small- and medium-sized enterprises, and large companies worldwide. In addition, it offers demand and time deposits and current and savings accounts.
On July 15Santander Holdings USA, the bank’s U.S. holding company, agreed to acquire Amherst Pierpont Securities by acquiring its parent holding company, Pierpont Capital Holdings LLC. Ana Botín, Santander Group executive chairman, said, “This acquisition is consistent with our customer-focused strategy and our commitment to profitable growth in the USA.”
SAN’s profit before tax increased 64% year-over-year to €3.10 billion ($3.66 billion) for its fiscal first quarter ended March 31, 2021. Its attributable profit grew 385.8% year-over-year to €1.61 billion ($1.90 billion). And its EPS came in at €0.08 ($0.10), up 670.1% year-over-year.
Analysts expect SAN’s EPS and revenue to increase 26.4% and 2.6%, respectively, year-over-year to $0.30 and $53.66 in its fiscal year 2022. The stock has soared 91.5% over the past nine months to close yesterday’s trading session at $3.78.
SAN’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has a B grade for Stability and Sentiment. Within the Foreign Banks industry, SAN is ranked #3 of 98 stocks. To see the additional POWR Ratings for SAN (Value, Growth, Quality, and Momentum), click here.
Barclays PLC (BCS)
BCS provides various financial products and services operating through Barclays UK and Barclays International divisions. The London-based company offers financial services that include retail banking, credit cards, wholesale banking, investment banking, and wealth management services.
James E Staley, BCS Group CEO, said, “Following the launch of our point-of-sale finance partnership with Amazon in Germany last year, we have agreed to extend our Amazon partnership to the U.K., a significant expansion of our franchise in Europe’s two largest consumer markets. Alongside existing partnerships including with Apple in the U.K., it demonstrates the strength and potential of our consumer platform.”
BCS’ net operating income increased 40% year-over-year to €5.84 billion ($6.89 billion) for its fiscal first quarter ended March 31, 2021. Its profit before tax grew 13% year-over-year to €2.40 billion ($2.83 billion). Its attributable profit came in at €1.70 billion ($2.01 billion), representing a 181.6% year-over-year increase.
The company’s EPS is expected to increase 145.8% year-over-year to $1.29 in its fiscal year 2021. In addition, BCS’ revenue is expected to increase 4.3% year-over-year to $7.08 billion for the quarter ending September 30, 2021. Over the past nine months, the stock has rallied 65.7% to close yesterday’s trading session at $9.51.
BCS’ POWR Ratings reflect solid prospects. The company has an overall B rating, which translates to Buy in our proprietary ratings system. It has an A grade for Sentiment, and a B grade for Stability and Value.
Click here to see the additional POWR Ratings for BCS (Growth, Momentum, and Quality). BCS is ranked #1 in the Foreign Banks industry.
Deutsche Bank Aktiengesellschaft (DB)
Headquartered in Frankfurt am Main, Germany, DB operates 1,891 branches and provides investment, financial, and related products and services to private individuals, corporate entities, and institutional clients worldwide. It operates through four segments: Corporate Bank, Investment Bank, Private Bank, and Asset Management.
DB and Oracle (ORCL) agreed on a multi-year collaboration on June 24 to modernize its database technology and accelerate the bank’s digital transformation. Bernd Leukert, the company’s Chief Technology, Data, and Innovation Officer, said, “In the process, we will simplify and modernize our technology environment, save the bank significant costs and reduce energy consumption through consolidated servers.”
DB’s revenue increased 14% year-over-year to €7.23 billion ($8.53 billion) for its fiscal first quarter ended March 31, 2021. Its profit before tax grew 671.3% year-over-year to €1.59 billion ($1.87 billion). Its profit came in at €1.04 billion ($1.22 billion), representing a 1471.2% year-over-year increase.
For its fiscal year 2021, analysts expect DB’s EPS and revenue to increase 46.8% and 1.1%, respectively, year-over-year to $1.16 and $28.72 billion. It surpassed the consensus EPS estimates in three of the trailing four quarters. The stock has soared 31.5% over the past nine months to close yesterday’s trading session at $12.55.
It’s no surprise that DB has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has an A grade for Growth, and a B grade for Stability and Sentiment.
Click here to see DB’s ratings for Momentum, Value, and Quality as well. DB is ranked #2 in the Foreign Banks industry.
SAN shares were trading at $3.73 per share on Tuesday afternoon, down $0.05 (-1.32%). Year-to-date, SAN has gained 22.30%, versus a 17.52% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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