Best bank stocks to buy in 2022

In this guide, we explain the banking industry and how you can invest in bank stocks. We also offer our top ten best bank stocks to buy.
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Updated: Sep 26, 2022
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Most investors don’t understand bank stocks because bank businesses seem complicated. However, the banking business model is relatively easy to understand.

A bank collects money from depositors who have savings, checking accounts, or fixed-income products. It then lends the money to other individuals and corporations who apply for mortgages, personal loans, or business loans, and it makes profits from the interest it charges on those loans. Thus, investors need to study banks’ interest rates, loan approvals, and default rates to know which ones to invest in.

What are the top bank stocks to buy?

Based on their financial health, profitability, market capitalization, and performance, these are our picks for the top 10 bank stocks to buy this year:

#Stock nameTrade now
1Morgan Stanley
2Citi Group
3JP Morgan
4Bank of America
5Goldman Sachs
6SVB Financial Group
7HomeStreet
8Customers Bancorp
9Flagstar Bancorp
10Allstate Corp
List chosen by our team of analysts, updated September 2022.

1. Morgan Stanley (NYSE: MS)

As of February 2021, Morgan Stanley had a market capitalization of $123.7 billion. This investment bank was one of the market’s silent performers in 2020. Despite a tough and uncertain economy, the bank made strategic acquisitions and diversified its revenue streams away from traditional investment banking. Morgan Stanley shares have increased by 44.6% in the three months to February 2021. The best way to trade this stock is to buy on dips.

2. Citigroup Inc. (NYSE: C)

Citigroup Inc. is a universal bank, offering both commercial and investment banking services. It is one of the most capitalized banks. The bank is expected to continue its impressive momentum in 2021 after rallying by 41% between November 2020 and February 2021. At the time of writing, the stock is trading below its 52-week high, which means it still has significant upside.

3. JP Morgan (NYSE: JPM)

JP Morgan had a $389.9bn market capitalization in February 2021. Since dropping by almost 35% in March 2021, the stock has been on the rise, with minor pullbacks from time to time. When this stock is in a pullback, trading below its 50-day simple moving average (SMA) — as it is at the time of writing — it could be a good buy when it reaches a support level and reverses.

4. Bank of America (NYSE: BAC)

Bank of America Corp. is the second-largest American bank by assets, with a market capitalization of $258bn at the time of writing. The bank has recently been strengthening its online banking platform to appeal to younger customers. The stock rallied by 43% in January 2021 but pulled back in February 2021 to trade below its 50-day SMA, which exemplifies a good time to buy shares.

5. Goldman Sachs (NYSE: BAC)

Goldman Sachs reported a profit of about $3.5 billion in Q3 2020, driven by strong trading activities. What makes this bank’s shares a good buy is that, unlike other banks that have a large consumer operation and have to set aside huge resources to cover loan losses, Goldman (as an investment bank) doesn’t need to worry about bad loans. Goldman Sachs shares increased by 46% in the three months to February 2021.

Where to buy the best bank stocks

Bank stocks can be purchased through online stockbrokers. Based on several factors, such as commission charges, customer services, and trade execution speed, we have identified the best brokers.

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How to Trade and Invest in Bank Stocks?

  • Open a Trading Account: choose a suitable online stockbroker and open a share-dealing account. Pay attention to commissions and look out for hidden charges like interest on margins (the borrowed money) or service fees for withdrawals. Also, take note of trading limits and minimum account balances.
  • Choose the Bank Stock to Trade: you will see a list of all the available bank stocks on your broker’s online platform. There are technical and fundamental filters you can use to narrow the list to a handful of bank stocks. Then, perform your fundamental analysis to choose the most healthy, innovative, and profitable banks to trade.
  • Start Trading: when you’ve selected the bank stock to trade, input the number of shares you want to buy and hit the buy button. Remember not to risk more than 2% of your capital in any single trade and don’t trade with the money you can’t afford to lose.

What are bank stocks?

The banking industry provides most of the capital that businesses need to operate. It serves as a conduit through which people’s net income are made available to those who need them to execute their projects. Basically, banks lend depositors’ money to businesses and individuals who need them, and they make profits from the difference between the interest income on the loans and the interests it pays to depositors.

Generally, there are three categories of banks: commercial banks, investment banks, and universal banks.

Commercial banks are the most common ones and are actually what most people know as banks. They provide services to consumers and businesses, such as checking and savings accounts, credit cards, auto loans, mortgages, and certificates of deposit. Wells Fargo (NYSE:WFC) is an example of a commercial bank.

Investment banks provide wealth management and investment services to institutional clients such as hedge funds and high-net-worth individuals. They issue debt securities, help companies go public through initial public offerings (IPOs), and also provide advisory services on mergers and acquisitions. For any service they provide, they earn service fees. Examples include Morgan Stanley (NYSE:MS) and Goldman Sachs (NYSE:GS).

Universal banks offer both commercial banking and investment banking services. So, they enjoy the benefits of having a diversified revenue stream, but they also bear the risks of both commercial and investment banking operations. Examples include Barclays (LSE: BARC), Bank of America (NYSE:BAC), Citigroup (NYSE:C), and JPMorgan Chase (NYSE:JPM).

What are the Trading Hours for Bank Stocks?

As with other stocks, bank stocks are traded on major stock exchanges around the world. So, the trading hours depend on the exchange. In the US market, stocks are traded between 9.30 am and 4 pm ET when the NYSE and Nasdaq are open. However, trading can also extend into the after-hours (the period after the market has closed for the day) and the pre-market (before the market opens) due to the availability of electronic communication networks (ECN). In the UK market, stocks are usually traded between 8 am and 4.30 pm when the London Stock Exchange is open.

Are bank stocks a good investment?

Bank stocks are a good investment because most of them have returned profits during a difficult economic period. Also, the prices of bank stocks are relatively low, and fundamentals support significant growth in the medium term. The reopening of the economy and issuance of stimulus checks could inject more fiscal liquidity into the banks. Banks also have the option of using their revenues to buy back shares, which is good for investors.

Ensure you do your research to choose the most profitable and innovative banks. However, don’t neglect technical analysis since bank stocks tend to fluctuate in tight trading ranges or ebb and flow steadily. It could be better to buy on dips, but you can also trade breakouts.

Latest bank stocks news

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Sources & references
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