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Chicago, IL – February 24, 2026 – Today, Zacks Equity Research discusses HSBC Holdings HSBC, Itau Unibanco Holding ITUB and Barclays PLC BCS.
Link: https://www.zacks.com/commentary/2873239/3-foreign-bank-stocks-to-invest-in-from-the-booming-industry
Global lenders have been streamlining operations, which has improved revenue quality and cost efficiency. Though these restructuring efforts may raise near-term expenses, they are expected to drive sustainable growth. Meanwhile, lower interest rates (as most central banks ease monetary policy) are likely to spur borrowing and reduce funding costs, supporting banks' top line.
Although uneven economic recovery across developed and emerging markets has weighed on revenue expansion for players in the Zacks Foreign Banks Industry, firms like HSBC Holdings, Itau Unibanco Holding and Barclays PLC will gain from the business restructuring efforts and gradually declining rates.
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.
Continued Restructuring Efforts to Support Growth: Many global lenders have been undertaking business-restructuring initiatives to improve efficiency. Banks have exited non-core geographies, scaled back low-return business lines and redeployed capital toward higher-growth segments, such as wealth management, transaction banking and digital platforms. By reallocating capital to stronger franchises and deepening client relationships, these banks are enhancing revenue quality, improving net interest margins and generating more stable fee-based income streams.
Also, restructuring has translated into leaner operating models and better cost discipline. Workforce reductions, branch rationalization and technology-driven automation have lowered structural expenses and resulted in an improvement in cost-to-income ratios. Thus, disciplined restructuring is expected to position foreign banks for sustainable growth by aligning capital, costs and strategy more effectively.
Lower Rates Likely to Aid Interest Income Growth: Although not all, most of the central banks across the globe have eased monetary policy in response to slowing inflation or weaker economic growth. While falling interest rates can compress margins, lower rates tend to stimulate borrowing activity across mortgages, corporate loans and trade finance, which will lift loan volumes and support top-line growth.
If rate cuts occur alongside improving economic sentiment, credit demand from businesses and consumers strengthens. Moreover, declining rates mostly result in a fall in funding costs, particularly for banks with diversified deposit bases. Thus, foreign banks' net interest income (NII), which was under pressure earlier because of higher funding costs, is expected to benefit.
Uneven Global Economic Recovery to Limit Growth: 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. 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.
The Zacks Foreign Banks Industry is a 65-stock group within the broader Zacks Finance Sector. The industry currently carries a Zacks Industry Rank #23, which places it in the top 9% 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 February 2025-end, the industry's most recent earnings estimates for the current year have been revised 16.1% 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.
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 93%. The S&P 500 composite has rallied 40.7% and the Zacks Finance Sector has appreciated 38.9%.
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 3.45X. This compares with the highest level of 3.48X, the lowest level of 1.33X and the median of 1.76X 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 11.91X, which the chart below shows.
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 6.11X and the median level of 6.20X for the same period are above the Zacks Foreign Banks Industry's ratios.
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 (for which it has received shareholder approval). 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, the bank is winding down its non-core operations in the U.K., 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.
HSBC has been restructuring its operations to improve operating efficiency. In sync with this, the bank partnered with Mistral AI, a France-based start-up, to accelerate the rollout of generative artificial intelligence across the organization. Also, it is undertaking a sweeping reorganization of its trading business. In February 2025, HSBC 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 to implement these efforts.
Shares of the company have risen 35.2% on the NYSE in the past six months. The Zacks Consensus Estimate for its 2026 earnings has moved 1.6% higher in the past 30 days. Currently, HSBC carries a Zacks Rank #2 (Buy).
Itau Unibanco: Headquartered in Sao Paulo, Brazil, this Zacks Rank #2 company is controlled by Itau Unibanco Participacoes S.A. As a premier banking brand in Brazil, it has a large branch network in geographic areas with high economic activity. Branches are concentrated in Southeast Brazil, the country's wealthiest region. As part of its internationalization strategy, the company has consolidated its presence in other countries of the Southern Cone — Argentina, Chile, Paraguay and Uruguay — with branches in regions where activity levels are high.
Driven by strategic acquisitions, ITUB has been expanding its operations. The acquisition of ZUP IT in March 2024 is expected to bolster the bank's efforts in digital transformation, enabling the development of advanced digital projects and the delivery of new functionalities and digital products. Also, ITUB acquired Ideal Holding to bolster its investment ecosystem (the transaction will be carried out in two phases over five years, the first phase of which was completed in March 2023). In 2022, ITUB acquired an 11.4% equity stake in XP Inc. for R$8 billion. Such inorganic growth efforts to diversify product mix are expected to support the company's top line in the upcoming quarters.
Itau Unibanco's ongoing investments in technology will likely contribute to improving processes, reducing costs and increasing productivity gains. The company had initiated a transformational strategy, iVarejo 2030, at its retail operations unit. Its adoption of the phygital and omnichannel approach, as well as the e-commerce model, will improve in-person services and revamp its branch networks.
ITUB has been modernizing its banking legacy systems and migrating services to the cloud. The bank is transitioning from seven apps, which had completely different login methods, to two apps — Super App and Ion — with a single login method. Continued investments in technology, purchases and increasing scale will likely make the company more efficient and competitive in its domain.
Shares of Itau Unibanco have gained 42.6% on the NYSE in the past six months. The Zacks Consensus Estimate for the company's 2026 earnings has been revised 2.4% upward in the past 30 days.
Barclays: Headquartered in London, BCS is a major global banking and financial services company with £1,544.2 billion ($2,106.3 billion) in total assets as of Dec. 31, 2025. With a clear emphasis on sharpening focus on core businesses, Barclays has been bolstering its market position through targeted acquisitions, partnerships and portfolio actions.
In October 2025, it announced a deal to acquire the United States-based digital lending platform Best Egg. In August 2025, it acquired a U.S. credit card portfolio with $1.6 billion of receivables by becoming the exclusive issuer of General Motors cards, while in April, it partnered with New York-based Brookfield Asset Management Ltd. to transform its payment acceptance business. The bank also completed the sale of its stake in Entercard Group and its Germany-based consumer finance business last year. These deals, along with several past ones, are expected to support an improvement in profitability over time.
After years of subdued performance, Barclays' core operating metrics have started witnessing improvement. The company's total income saw a three-year (2022-2025) compound annual growth rate (CAGR) of 5.3%. Though the uncertainty of the capital markets business continues to weigh on the company's top-line performance, business-restructuring efforts are expected to provide much-needed support, going forward.
Barclays has been undertaking cost-saving actions to improve operating efficiency. Through the structural cost actions, the company recorded £1.7 billion in total gross savings in 2024 and 2025. Now, the company targets to achieve total gross efficiency savings of £2 billion and a cost-to-income ratio in the low 50s by 2028.
Currently, Barclays sports a Zacks Rank #1 (Strong Buy). BCS shares have gained 27.4% on the NYSE in the past six months. The Zacks Consensus Estimate for the company's 2026 earnings has moved 1.8% higher in the past 30 days. You can see the complete list of today's Zacks #1 Rank stocks here.
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Past 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.
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This article originally published on Zacks Investment Research (zacks.com).
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