Zacks Industry Outlook Highlights HSBC, Barclays and NatWest Group

For Immediate ReleaseChicago, IL – March 19, 2025 – Today, Zacks Equity Research discusses HSBC Holdings plc HSBC, Barclays PLC BCS and NatWest Group plc NWG.Industry: Foreign BanksLink: https://www.zacks.com/commentary/2431260/3-foreign-bank-stocks-to-bet-on-from-a-prospering-industryBanks worldwide have been continuously restructuring their businesses to focus on core operations. While these initiatives are expected to result in elevated expenses, they will drive growth in the long run. While the uneven economic recovery in developed and emerging nations has been hurting revenue growth for companies within the Zacks Foreign Banks Industry, relatively lower interest rates will provide support.Despite geopolitical and macroeconomic woes, industry players like HSBC Holdings plc, Barclays PLC and NatWest Group plc are well-placed to gain from business streamlining efforts and low rates.About the IndustryThe Zacks Foreign Banks Industry consists of overseas banks with operations in the United States. Since a foreign banking organization may have federal and state-chartered offices in the country, the Federal Reserve plays a major role in supervising their U.S. operations. In addition to providing a broad range of products and services to customers in the United States, the banks offer financial services to corporate clients having businesses in the country.The financial firms establish relations with U.S. corporations operating in their home countries. Some units of foreign banks offer a broad range of wholesale and retail services and conduct money-market transactions for their parent organizations. Some industry players are involved in developing only specialized services like wealth/asset management and investment banking.3 Themes to Influence Foreign Bank IndustryRelatively Lower Interest Rates: The central banks globally have started lowering interest rates as inflation numbers gradually cool. This is expected to support foreign banks’ net interest income (NII) and margin, which were under pressure because of rising funding/deposit costs. With falling rates and decent economic growth, demand for loans is expected to improve. Industry players are likely to witness NII expansion.Further, efforts taken by most banks to diversify revenues to become less dependent on spread income are likely to aid non-interest income. Also, lower interest rates will lead to the revival of investment banking business and support wealth/asset management operations. Hence, industry players are likely to record an increase in revenues in the coming quarters.Restructuring Efforts: Several foreign banks are undertaking business restructuring initiatives. Many banks have been divesting or closing non-core operations to increase focus on core businesses and profitable markets. Through this, industry players are changing their revenue mix and aiming to expand to other lucrative operations.Uneven Global Economic Recovery: Following the COVID-19 pandemic, global economic recovery has been uneven. In many regions, economic growth has slowed down but not fully recovered from the pandemic effect, while geopolitical headwinds are hurting the economy in others. Banks’ performances are directly linked to the performance of the overall economy. Weak economic growth in their home markets may hurt foreign banks’ profitability to some extent in the upcoming period.Zacks Industry Rank Indicates Bright ProspectsThe Zacks Foreign Banks Industry is a 64-stock group within the broader Zacks Finance Sector. The industry currently carries a Zacks Industry Rank #47, which places it in the top 19% of more than 250 Zacks industries.The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates outperformance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.The industry’s positioning in the top 50% of the Zacks-ranked industries is because of the encouraging earnings outlook for the constituent companies in aggregate. The aggregate earnings estimate revisions show that analysts are gaining confidence in this group’s growth potential. Since November 2024, the industry’s earnings estimates for 2025 have been revised 4.2% upward.Hence, we present a few stocks from the industry that you may want to invest in. But before that, let us check out the industry’s recent stock market performance and valuation picture.Industry Versus S&P 500 and SectorThe Zacks Foreign Banks Industry has outperformed the S&P 500 and its sector in the past year. Stocks in the industry have collectively risen 22.9%. The S&P 500 composite has rallied 9.5%, and the Zacks Finance Sector has appreciated 15.6%.Industry's ValuationOne might get a good sense of the industry’s relative valuation by looking at its price-to-tangible book ratio (P/TBV), which is commonly used for valuing foreign banks because of large variations in their earnings results from one quarter to the next.The industry currently has a trailing 12-month P/TBV of 2.38X. This compares with the highest level of 2.39X, the lowest level of 0.79X and the median of 1.66X over the past five years. The industry is trading at a significant discount compared with the market at large, as the trailing 12-month P/TB for the S&P 500 composite is 12.97X.As finance stocks typically have a lower P/TBV ratio, comparing foreign banks with the S&P 500 might not make sense to many investors. However, a comparison of the group’s P/TBV ratio with that of its broader sector ensures that it is trading at a decent discount. The Zacks Finance Sector’s trailing 12-month P/TBV of 5.78X and the median level of 4.56X for the same period are above the Zacks Foreign Banks Industry’s ratios.3 Foreign Bank Stocks to ConsiderHSBC: Headquartered in London, HSBC is a major global banking and financial services firm with $3.02 trillion in assets as of Dec. 31, 2024. The company has been committed to bolstering its performance, focusing on building operations across Asia. It intends to position itself as a top bank for high-net-worth and ultra-high-net-worth clients in the region.In sync with its Asia pivot strategy, HSBC acquired Citigroup's retail wealth management business in China and Singapore-based SilkRoad Property Partners Group. Also, it re-launched its private banking business in India.HSBC has been restructuring its operations to improve operating efficiency. In October 2024, the company announced an initiative to simplify its organizational structure, which became effective on Jan. 1, 2025. Driven by this restructuring initiative, it targets to achieve almost $1.5 billion of annualized savings by 2026-end. The company will likely incur nearly $1.8 billion in total severance and other upfront charges by the end of next year to implement business simplification efforts.In sync with this, HSBC announced the winding down of its investment banking activities in the U.K., Europe and the United States, and the divestiture of its French life insurance arm, HSBC Assurances Vie (France) and private banking business in Germany. Apart from these, the bank completed the sale of its businesses in the United States, Canada, New Zealand, Greece, Russia, Argentina and Armenia, as well as the retail banking operations in France and Mauritius. It also announced the planned sale of its business in South Africa.Shares of the company have risen 29.3% on the NYSE in the past six months. The Zacks Consensus Estimate for its current-year earnings has moved 1% higher in the past 30 days. Currently, HSBC carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Barclays: Headquartered in London, Barclays is a major global banking and financial services company with £1,518.2 billion ($1,897.8 billion) in total assets as of Dec. 31, 2024.Barclays’ initiatives to improve efficiency over the last few years have been bearing fruit, as evident from a fall in expenses. Its total operating expenses decreased in 2024. Overall expenses are expected to remain manageable as business restructuring initiatives continue to provide support.BCS intends to undertake further cost-saving actions to improve efficiency. The structural cost actions resulted in gross savings of £1 billion in 2024. The company aims to achieve gross efficiency savings of £0.5 billion in 2025. By 2026-end, management expects total gross efficiency savings of £2 billion and the cost-to-income ratio to be in the high 50s.Barclays has been striving to simplify operations and focus on core businesses. In February 2025, it divested its Germany-based consumer finance business. In November 2024, this Zacks Rank #2 company acquired Tesco’s retail banking business. The move is expected to complement its existing business and strengthen its position in the market. Further, as part of its business overhaul last year, the company announced changes to its operating divisions. Driven by these initiatives, the company’s profitability is expected to improve over time.BCS shares have soared 27.4% on the NYSE in the past six months. The Zacks Consensus Estimate for the company’s 2025 earnings has moved 2.5% higher in the past 30 days.NatWest: This Edinburgh, UK-based company operates as a banking and financial services company. NWG provides personal and business banking, consumer loans, asset and invoice finances, commercial and residential mortgages, credit cards and financial planning services, as well as life, personal and income protection insurance.In December 2024, Natwest announced that it was set to launch its first Fintech Growth Programme, an exciting opportunity for fintech startups to use the resources, expertise and networks of an established high-street bank to help them scale up sustainably.Further, throughout 2024, NatWest has made good progress against its strategic priorities by growing all three of its customer businesses, improving productivity and actively managing capital. These initiatives are expected to support the company’s revenues and improve profitability.By 2025 end, NWG expects to achieve a return on tangible equity of 15-16%, and by 2027, the metric is expected to be greater than 15%.Shares of the company have risen 29.2% on the NYSE in the past six months. The Zacks Consensus Estimate for its current-year earnings has moved 7.6% higher in the past 30 days. Currently, NWG sports a Zacks Rank #1.Why Haven't You Looked at Zacks' Top Stocks?Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.Today you can access their live picks without cost or obligation.See Stocks Free >>Media ContactZacks Investment Research800-767-3771 ext. 9339support@zacks.comhttps://www.zacks.comPast performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.3% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Barclays PLC (BCS): Free Stock Analysis Report HSBC Holdings plc (HSBC): Free Stock Analysis Report NatWest Group plc (NWG): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks