Waterdrop Inc., UniCredit SpA, and Futu Holdings Ltd. lead financials stocks in 1-year trailing total returns, climbing by as much as 102{1668a97e7bfe6d80c144078b89af180f360665b4ea188e6054b2f93f7302966b} while the broader Russell 1000 Index and the financials sector have both fallen.
Financials stocks were rocked in March by the sudden collapse of Signature Bank and Silicon Valley Bank (SVB), the latter being the largest U.S. bank failure since 2008. The Financial Select Sector SPDR ETF (XLF) fell almost 12{1668a97e7bfe6d80c144078b89af180f360665b4ea188e6054b2f93f7302966b} between March 8, the day SVB’s announcement of a $1.8 billion loss on bond investments sparked the crisis, and March 17, the day SVB’s parent company filed for bankruptcy. The index has since stabilized, but it remains down 15{1668a97e7bfe6d80c144078b89af180f360665b4ea188e6054b2f93f7302966b} over the past 12 months, compared with the Russell 1000’s 11{1668a97e7bfe6d80c144078b89af180f360665b4ea188e6054b2f93f7302966b} drop.
Here are the top three financial stocks each with the best value, the fastest growth, and the most momentum. All data are as of April 2.
These are the financial stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows that you’re paying less for each dollar of profit generated.
| Best Value Financial Stocks | |||
|---|---|---|---|
| Price ($) | Market Capitalization (Market Cap) ($B) | 12-Month Trailing P/E Ratio | |
| Jackson Financial Inc. (JXN) | 37.41 | 3.1 | 0.6 |
| Aimia Inc. (AIM.TO) | CA$3.65 | CA$0.3 | 0.7 |
| Corebridge Financial Inc. (CRBG) | 16.02 | 10.4 | 1.3 |
Source: YCharts
- Jackson Financial Inc.: Jackson is a financial holding company offering annuities to retail investors across the U.S. Its subsidiaries include Jackson National Life Insurance Co., Jackson National Life Insurance Co. of New York, and PPM America. The company’s most recent dividend of $0.62 per share was paid March 23.
- Aimia Inc.: Aimia is a Canadian investment holding company that holds long-term investments in both public and private companies. It also operates an investment advisory business.
- Corebridge Financial Inc.: Corebridge is a financial services company offering life insurance, annuities, retirement solutions, asset management, and related products to customers around the world. Corebridge posted net losses of $566 million in the last quarter of 2022, due largely to realized losses on derivatives and foreign exchange movements.
These are the top financial stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-over-year (YOY) percentage revenue growth and most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of more than 1,000{1668a97e7bfe6d80c144078b89af180f360665b4ea188e6054b2f93f7302966b} were excluded as outliers.
| Fastest Growing Financial Stocks | ||||
|---|---|---|---|---|
| Price ($) | Market Cap ($B) | EPS Growth ({1668a97e7bfe6d80c144078b89af180f360665b4ea188e6054b2f93f7302966b}) | Revenue Growth ({1668a97e7bfe6d80c144078b89af180f360665b4ea188e6054b2f93f7302966b}) | |
| Ambac Financial Group Inc. (AMBC) | 15.48 | 0.7 | N/A (see company description) | 275.0 |
| Old National Bancorp (ONB) | 14.41 | 4.2 | 97.1 | 180.5 |
| First Citizens BancShares Inc. (FCNCA) | 973.78 | 14.1 | 38.1 | 164.8 |
Source: YCharts
- Ambac Financial Group Inc.: Ambac is a financial services holding company that operates a specialty property and casualty insurance distribution and underwriting platform. It reported net income of $175 million in the last three months of 2022, compared with a net loss in the prior-year quarter. Because EPS moved from negative to positive, the company does not have an EPS growth figure above. The company’s top and bottom lines were assisted by a nearly $2 billion settlement with Bank of America over losses related to the 2008 financial crisis.
- Old National Bancorp: Old National Bancorp is the holding company of Old National Bank, the sixth-largest bank in the midwestern U.S., with about $47 billion in assets. Higher interest rates and loan growth contributed to interest income almost tripling in the last quarter of 2022.
- First Citizens BancShares Inc.: First Citizens BancShares is the holding company of First-Citizens Bank & Trust Co., a personal and commercial bank with over $100 billion in assets. In March 2023, First Citizens acquired a substantial portion of Silicon Valley Bank after the latter collapsed.
These are the financial stocks that had the highest total return over the past 12 months.
| Financial Stocks with the Most Momentum | |||
|---|---|---|---|
| Price ($) | Market Cap ($B) | 12-Month Trailing Total Return ({1668a97e7bfe6d80c144078b89af180f360665b4ea188e6054b2f93f7302966b}) | |
| Waterdrop Inc. (WDH) | 2.99 | 1.2 | 102.0 |
| UniCredit SpA (UNCRY) | 9.38 | 36.4 | 84.5 |
| Futu Holdings Ltd. (FUTU) | 51.85 | 7.3 | 59.2 |
| Russell 1000 Index | N/A | N/A | -10.7 |
| Financial Select Sector SPDR ETF (XLF) | N/A | N/A | -15.2 |
Source: YCharts
- Waterdrop Inc.: Waterdrop is a Chinese insurance technology platform offering a variety of healthcare and insurance products online. The company’s net operating revenue increased by about 13{1668a97e7bfe6d80c144078b89af180f360665b4ea188e6054b2f93f7302966b} to $98.5 million for the most recent quarter.
- UniCredit SpA: UniCredit is an Italian international banking group that offers mortgages, life insurance, consumer credit, investment banking, asset management, and related services around the world.
- Futu Holdings Ltd.: Futu is a Hong Kong-based financial holding company that offers an online brokerage platform and related services. Its customers are in the U.S., Hong Kong, and China. Futu reported an almost 20{1668a97e7bfe6d80c144078b89af180f360665b4ea188e6054b2f93f7302966b} year-over-year increase in paying clients in the final quarter of 2022, while net income almost doubled for the fourth quarter of last year.
The Impact of Interest Rates on Financial Stocks
Financial stocks typically benefit from rising interest rates through increased profit margins, heightened trading activity, and greater investment returns.
Increased Profit Margins: Rising interest rates allow banks to widen the net interest margin (NIM) between what they pay depositors and receive from borrowers. Not always, but often, rising interest rates translate into higher share prices for financial stocks. For example, the sector gained 20{1668a97e7bfe6d80c144078b89af180f360665b4ea188e6054b2f93f7302966b} in 2017, following the federal fund rate higher throughout that year.
Trading Activity: Financial institutions that offer securities trading, such as investment banks and brokers, often see trading activity increase when interest rates rise, resulting from positive investor sentiment. One exception to this rule of thumb occurred during the COVID-19 pandemic amid record-low interest rates. Brokerage firms enjoyed unprecedented trading volumes during this period as couped-up investors armed with government stimulus checks spent their time and money trading the stock market.
Investment Returns: Rising rates also allow financial institutions to earn higher interest on their yielding assets. For instance, insurance companies enjoy greater profits during rate hike cycles because their underlying bond investments yield greater returns. Insurers typically hold lots of safe debt like fixed-interest securities to back their insurance policies.
Advantages of Financial Stocks
Two key advantages of financial stocks include regulation and exposure to investment banking.
Regulation: After the 2007-2008 global financial crisis, lawmakers passed the Dodd-Frank Wall Street Reform and Consumer Protection Act to overhaul the U.S. financial system. Banks must now maintain certain capital levels, while large banks must undergo an annual “stress test” to determine their ability to survive adverse downturns. These heightened regulations substantially lower the risk of investing in the financial sector. Still, the early-2023 collapse of two banks—Signature Bank and Silicon Valley Bank—is a reminder that regulation is not a guarantee of the success of financial companies.
Investment Banking: Investing in financial institutions that offer investment banking provides broad exposure to services that may outperform traditional lending during different stages of the economic cycle.