3 Stocks to Invest in From the Flourishing Foreign Banks Industry

The business restructuring efforts taken by banks across the globe to increase focus on core operations are expected to elevate expenses in the near term but drive growth in the long run. Though the uneven economic recovery in developed and emerging nations has been hurting revenue growth for companies within the Zacks Foreign Banks Industry, declining interest rates are expected to provide support to the top line.

Thus, despite geopolitical and macroeconomic woes, industry players like HSBC Holdings HSBC, Mitsubishi UFJ Financial Group MUFG and Deutsche Bank Aktiengesellschaft DB are well-poised to gain from business streamlining efforts and lower rates.

About the Industry

The 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 its U.S. operations. In addition to providing a broad range of products and services to customers in the United States, banks offer financial services to corporate clients having businesses in the country. 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 Foreign Bank Industry Trends to Watch

Constant Restructuring Initiatives: Several foreign banks have continuously been undertaking business restructuring initiatives to improve efficiency. Banks have been divesting or closing non-core operations to focus more on their core businesses and profitable markets. Through this, industry players are changing their revenue mix and aiming to expand to other lucrative operations. Such efforts will likely aid banks’ profitability.

Gradually Declining Interest Rates: Although not all, but most of the central banks across the globe have started lowering interest rates. Thus, foreign banks’ net interest income (NII) and margins, which were under pressure because of higher funding/deposit costs earlier, are expected to benefit. With falling rates and decent economic growth, demand for loans will likely continue to improve. Thus, industry players will witness NII expansion. Moreover, efforts taken by most banks to diversify revenues to become less dependent on spread income are likely to aid non-interest income. With declining interest rates, the overall investment banking business performance and wealth/asset management operations have started improving, with the trend expected to continue in the near term. Hence, industry players are likely to record an increase in revenues in the coming quarters.

Uneven Global Economic Recovery: Following the COVID pandemic, global economic recovery has been uneven. In many regions, economic growth has taken pace but those regions have not yet fully recovered from the pandemic’s effects. In fact, geopolitical headwinds are still hurting the economy in some regions. 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 Prospects

The Zacks Foreign Banks Industry is a 67-stock group within the broader Zacks Finance Sector. The industry currently carries a Zacks Industry Rank #80, which places it in the top 33% 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-end, the industry’s most recent earnings estimate for 2025 has been revised 18.1% 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 vs. S&P 500 & Sector

The Zacks Foreign Banks Industry has outperformed the S&P 500 and its sector in the past two years. Stocks in the industry have collectively surged 71.1%. The S&P 500 composite has rallied 54.7% and the Zacks Finance Sector has appreciated 44.4%.

2-Year Price Performance

Industry's Valuation

One may 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 from one quarter to the next.

The industry currently has a trailing 12-month P/TBV of 2.77X. This compares with the highest level of 2.78X, the lowest level of 1.22X and the median of 1.73X 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/TBV for the S&P 500 composite is 12.81X, which the chart below shows.

Price-to-Tangible Book Ratio (TTM)

As finance stocks typically have a lower P/TBV ratio, comparing foreign banks with the S&P 500 may 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 5.88X and the median level of 4.73X for the same period are above the Zacks Foreign Banks Industry’s ratios.

Price-to-Tangible Book Ratio (TTM)

3 Foreign Bank Stocks to Consider

HSBC: Headquartered in London, HSBC is a major global banking and financial services firm, with $3.23 trillion in assets as of Sept. 30, 2025. 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 October 2025, HSBC proposed the privatization of its Hong Kong subsidiary, Hang Seng Bank. In mainland China, it has been growing its wealth business through lifestyle-focused centers, acquisitions like Citigroup’s retail wealth arm, digital upgrades and talent hires. In India, the company is expanding rapidly, with approval to open 20 new branches. As the country’s wealthy population surges, HSBC is boosting its presence through initiatives like launching Global Private Banking, acquiring L&T Investment Management and enhancing Premier Banking. These initiatives will likely help the company strengthen its position in the Asia and global markets.

Moreover, in sync with its Asia pivot strategy, HSBC announced plans to redeploy an additional $1.5 billion from the reallocation of costs from non-strategic or low-returning activities into its core strategy, wherein it has competitive strength. The bank is winding down its non-core operations in the UK, Europe and the United States, while maintaining a more focused presence in Asia and the Middle East.

It is also progressing with divestments in Sri Lanka, Uruguay, Germany, South Africa, Bahrain and France. Apart from these, HSBC completed the sale of its businesses in Canada, New Zealand, Greece, Russia, Argentina and Armenia, as well as the retail banking operations in France and Mauritius.

Further, HSBC has been restructuring its operations to improve operating efficiency. In February 2025, the company announced a $1.5-billion cost-saving plan from the organizational simplification efforts (to be achieved by 2026). It will likely incur $1.8 billion in total severance and other upfront charges by the end of next year to implement these efforts.

Shares of the company have risen 19.2% on the NYSE in the past six months. The Zacks Consensus Estimate for its current-year earnings has moved 8.3% higher in the past 60 days. Currently, HSBC carries a Zacks Rank #2 (Buy).

Price & Consensus: HSBC

Mitsubishi UFJ: Headquartered in Tokyo, Japan, this Zacks Ranked #2 company is the world’s leading bank-holding company that operates under an integrated business group system.

Over the last several years, MUFG has been undertaking various inorganic growth efforts (through acquisitions and investments) along with business restructuring initiatives. As of Oct. 1, 2025, MUFG Bank completed the regulatory procedures to acquire 100% of the shares of its various overseas securities subsidiaries, aimed at strengthening the integrated operational framework for its global wholesale/investment banking and securities business. In May, MUFG invested in Greenprint Technologies, a digital platform focused on sustainability reporting and data, as part of a broader shift toward the ESG/sustainability domain.

Additionally, MUFG formed an alliance with Curiosity Lab to collaborate on smart-city systems and next-gen tech deployment. In April, the company’s credit-card affiliate acquired 50.02% of Zenhoren, a company specialized in rent-guarantee services. By March, MUFG completed the full buyout of WealthNavi, a Japanese fintech/robo-adviser company. These deals, along with several past ones, position the company well for top-line growth.

By 2026, MUFG aims to accelerate transformation and innovation, strengthening domestic retail banking, expanding wealth management/corporate & investment banking and scaling global & non-interest income businesses. It has been trying to reduce reliance on traditional net interest income and diversify via fee-based, fintech-driven, wealth-management and global-market services.

MUFG’s capital strength favors flexible share repurchases. Since May 2017, the company has completed several share-repurchase programs that have enhanced shareholder value and facilitated flexible capital policy implementations in response to changes in the business environment. Shares of MUFG have gained 15.2% on the NYSE in the past six months. The Zacks Consensus Estimate for the company’s current fiscal-year earnings has been unchanged in the past 60 days.

Price & Consensus: MUFG

Deutsche Bank: Headquartered in Frankfurt am Main, this is the largest bank in Germany and one of the largest financial institutions in the world, as measured by total assets. It offers a wide variety of investment, financial and related products and services.

Growth in net revenues has been a key strength at Deutsche Bank. The metric has seen a CAGR of 5.8% over the three years ended 2024, with the uptrend persisting in the first nine months of 2025. The bank’s efforts to shift focus from investment banking to more stable businesses, such as private bank, corporate bank and the asset management unit, will likely continue to aid revenues in the upcoming period. DB closed the acquisition of Numis in 2023, which is likely to keep aiding the Asset Management segment. Management expects revenues to witness a CAGR of 5.5-6.5% for the period between 2021 and 2025.

Moreover, solid deposit balances support DB’s financials. The metric witnessed a CAGR of 3.3% over the three years ended 2024, with the uptrend continuing in the first nine months of 2025. The company benefits from its well-diversified deposit base across various client segments and regions. We believe the stable deposit balance will strengthen the company’s balance sheet.

Recently, Deutsche Bank outlined a new multi-year strategy that sets fresh growth and profitability targets through 2028, marking the next phase of its Global Hausbank expansion plan. The bank expects stronger revenue momentum, higher returns and improved cost discipline as it scales its core franchises.

The Zacks Consensus Estimate for the company’s 2025 earnings has been revised 5.5% higher over the past 60 days. DB shares have gained 27.8% on the NYSE in the past six months. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Price and Consensus: DB

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This article originally published on Zacks Investment Research (zacks.com).

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