Following the collapse of three U.S. banks, investors’ confidence in the banking sector has taken a hit. Concerns over the banking system remain despite assurances by the financial regulators.
Amid the sharp sell-off in U.S. banking names, investors could look beyond geographical borders by buying fundamentally strong foreign banking stocks China Minsheng Banking Corp., Ltd (CMAKY), KB Financial Group Inc. (KB), and Banco Macro S.A. (BMA).
Before diving deeper into the fundamentals of these stocks, let’s discuss what’s happening in the banking industry and why it could be wise to buy foreign bank stocks.
The collapse of the First Republic Bank came just weeks after the failures of Silicon Valley Bank and Signature Bank. Concerns over the safety of their deposits caused depositors to take their money out of these banks, leading to a bank run. The failures have caused an upheaval in the banking industry.
Although financial regulators and executives from top financial institutions have assured that the banking sector is safe, concerns over its stability remain, especially after regional bank PacWest Bancorp (PACW) confirmed it was exploring strategic options, including a sale. The bank reported that its deposits had declined by 9.5% for the week ended May 5, 2023.
Due to the bank failures, U.S. banks must contend further with tighter lending norms. This could put a strain on their profit margins in the upcoming quarters. Moody’s has cut the outlook on the U.S. banking system to Negative from Stable, citing a rapidly deteriorating operating environment.
Given these factors, investors could consider buying the featured foreign banking names.
Let’s take a closer look at their fundamentals.
China Minsheng Banking Corp., Ltd (CMAKY)
Headquartered in Beijing, the People’s Republic of China, CMAKY provides various financial products and services to individuals, small and micro-enterprises, corporate customers, government agencies, and financial institutions. The company operates through Corporate Banking, Retail Banking, and Others segments.
In terms of the trailing-12-month net income margin, CMAKY’s 37.77% is 46.4% higher than the 25.80% industry average. Likewise, its 12.60% trailing-12-month CAPEX/Sales is 561.4% higher than the industry average of 1.91%.
Its operating income for the first quarter ended March 31, 2023, increased 0.4% year-over-year to RMB36.77 billion ($5.27 billion). In addition, its net profit attributable to shareholders of the Bank, excluding extraordinary gain/loss items, increased 4.3% year-over-year to RMB14.27 billion ($2.05 billion). Also, its EPS came in at RMB0.33, representing a 6.5% increase over the prior-year quarter.
Its total non-performing loans (NPLs) came in at RMB69.27 billion ($9.94 billion), compared to RMB69.39 billion ($9.96 billion) for the fiscal year ended December 31, 2022.
CMAKY’s revenue for fiscal 2024 is expected to increase 9.7% year-over-year to $21.66 million. Over the past six months, the stock has gained 34.1% to close the last trading session at $4.12.
CMAKY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #12 out of 88 stocks in the Foreign Banks industry. In addition, it has an A grade for Stability and a B for Value. We have also given CMAKY grades for Growth, Momentum, Sentiment, and Quality. Get all the CMAKY ratings here.
KB Financial Group Inc. (KB)
Headquartered in Seoul, South Korea, KB provides a range of banking and related financial services to consumers and corporations worldwide. The company operates through seven segments: Retail Banking, Corporate Banking, Other Banking, Credit Card, Securities, Life Insurance, and Non-Life Insurance.
In terms of the trailing-12-month net income margin, KB’s 33.44% is 29.6% higher than the 25.80% industry average. Likewise, its 2.32% trailing-12-month CAPEX/Sales is 21.8% higher than the industry average of 1.91%.
KB’s net interest income for the first quarter ended March 31, 2023, increased 5.1% year-over-year to KRW2.78 trillion ($2.07 billion). Its net operating profit increased 11.2% year-over-year to KRW2.13 trillion ($1.59 billion). The company’s profit attributable to shareholders of the parent company increased 2.5% year-over-year to KRW1.50 trillion ($1.12 billion).
Analysts expect KB’s EPS for the quarter ending September 30, 2023, to increase 20.3% year-over-year to $2.61. Its revenue for the quarter ending June 30, 2023, is expected to increase 2.7% year-over-year to $2.89 billion. Over the past month, the stock has declined 0.9% to close the last trading session at $36.73.
KB’s POWR Ratings reflect solid prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. It is ranked #6 in the same industry. The stock has a B grade for Value.
To see the additional POWR Ratings of KB for Growth, Momentum, Stability, Sentiment, and Quality, click here.
Banco Macro S.A. (BMA)
Headquartered in Buenos Aires, Argentina, BMA provides various banking products and services to retail and corporate customers. It offers various retail banking products and services, such as savings and checking accounts, time deposits, credit and debit cards, loans, overdrafts, credit-related services, home and car insurance coverage, tax collection, utility payments, automated teller machines (ATMs), and money transfers.
In terms of the trailing-12-month Return on Total Assets, BMA’s 1.95% is 73.8% higher than the 1.12% industry average. Likewise, its 4.92% trailing-12-month CAPEX/Sales is 158.1% higher than the industry average of 1.91%.
BMA’s net income for the fourth quarter ended December 31, 2022, came in at $16.61 billion ($71.94 million). Its operating income rose 79% year-over-year to ARS78.20 billion ($338.71 million).
The company’s annualized return on average equity (ROAE) and annualized return on average assets (ROAA) came in at 16.9% and 3.3%, respectively. Also, its total deposits increased 13% year-over-year to ARS148.40 billion ($642.78 million).
Street expects BMA’s EPS and revenue for fiscal 2023 to increase 53.4% and 34.7% year-over-year to $5.83 and $2.57 billion, respectively. Over the past six months, the stock has gained 30.7% to close the last trading session at $17.12.
BMA’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #13 in the Foreign Banks industry. It has an A grade for Value. Click here to see the other ratings of BMA for Growth, Momentum, Stability, Sentiment, and Quality.
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CMAKY shares were trading at $4.12 per share on Wednesday afternoon, up $0.18 (+4.57%). Year-to-date, CMAKY has gained 10.75%, versus a 8.28% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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