The U.S. banking sector is grappling with instability marked by deposit outflows, credit downgrades, and growing domestic lender caution. Thus, one could explore beyond geographical borders and consider investing in sturdy foreign bank stocks Erste Group Bank AG (EBKDY – Get Rating), Banco Macro S.A. (BMA – Get Rating), and KB Financial Group Inc. (KB – Get Rating) instead.
Let’s understand this in detail.
The March collapse of Silicon Valley Bank and Signature Bank led to substantial deposit outflows and heightened scrutiny of the financial stability of lenders. Subsequently, S&P downgraded credit ratings and revised outlooks for several U.S. banks, mirroring a prior action by Moody’s, further unsettling the sector.
Amid concerns of an economic slowdown, ongoing deposit outflows, and impending stricter liquidity regulations, U.S. lenders are stockpiling substantial cash reserves. This cautious strategy, driven by regional bank failures, may lead to limited lending activity, especially affecting mid-sized banks, as the sector remains cautious and aims to stabilize.
As of August 2023, cash assets of U.S. banks totaled $3.26 trillion, reflecting a 5.4% increase from the end of 2022. While this surpasses pre-pandemic norms, it remains lower than the peak seen in the weeks following the March bank failures, according to Federal Reserve data.
Also, during the second quarter, U.S. banks disclosed an astounding $558 billion in unrealized losses on their held securities, according to data compiled by the Federal Deposit Insurance Corporation. This marked an 8.2% rise from the first quarter’s $515.50 billion, signifying a continued accumulation of losses since the crisis commenced.
Dubbed “March madness” by Cadence Bank (CADE) CEO Dan Rollins, the regional banking crisis earlier this year has receded after six months, yet its repercussions persist in the industry. Several regional bank executives and economists concur that it has left a lasting mark on the regional banking sector and the economy.
Considering the current condition of the U.S. banking industry, it could be wise to look beyond domestic boundaries. Considering this, let’s take a look at the fundamentals of the three best Foreign Banks stocks, starting with…
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