2023 was a challenging year for U.S. banks as they faced various operational and macroeconomic challenges. Despite expectations of three rate cuts this year, interest rates will likely remain reasonably high. This could continue to affect the profitability of U.S. banks. Moreover, a weak economy, deterioration of asset quality, and the likelihood of default on commercial real estate (CRE) loans could put pressure on the U.S. banking system.
Amid this backdrop, it could be wise to look beyond borders and invest in fundamentally strong foreign banking names Banco Bilbao Vizcaya Argentaria, S.A. (BBVA), Banco do Brasil S.A. (BDORY), KB Financial Group Inc. (KB), Banco Santander, S.A. (SAN), and Commerzbank AG (CRZBY) as they are insulated against the headwinds currently facing U.S. banks.
