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3 Foreign Bank Stocks to Keep an Eye on Despite Industry Headwinds
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The Zacks Foreign Banks Industry is likely to operate in a mixed and increasingly divergent environment in 2026. A fragmented global interest rate backdrop will create uneven net interest income (NII) and margin trends. At the same time, uneven global economic recovery could dampen loan demand and elevate credit risks in regions where growth remains subdued.
Against this backdrop, ongoing restructuring efforts, including portfolio optimization, cost reductions and greater investment in high-growth businesses, should help improve efficiency, strengthen profitability and position banks like HSBC Holdings (HSBC - Free Report) , UBS Group (UBS - Free Report) and Barclays PLC (BCS - Free Report) for sustainable long-term growth despite macroeconomic uncertainty.
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, these 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 Themes Impacting the Foreign Banks Industry
Fragmented Interest Rate Environment to Create Uneven NII Growth: This year, the world is not experiencing a coordinated cycle of interest rate cuts. Some central banks are easing rates, while many, including the Federal Reserve and Bank of England, are on hold. In fact, the European Central Bank and Bank of Japan are viewed as becoming more hawkish in 2026, with the ECB signaling that persistent energy-driven inflation could warrant at least one rate hike and the Bank of Japan shifting toward tighter policy as wage growth and domestic inflation strengthen. This fragmented global interest rate environment is expected to produce uneven NII and net interest margin (NIM) trends for banks.
In regions where rates are being cut, loan yields are expected to decline faster than funding costs, putting pressure on margins and slowing NII growth. Deposit pricing may remain sticky as banks continue competing for customer balances, compressing spreads. In contrast, banks operating in markets where central banks are holding rates steady or maintaining a hawkish stance could continue to benefit from relatively strong asset yields and favorable reinvestment opportunities. These conditions will likely support more resilient NIM and healthier NII growth, although persistently high borrowing costs may weigh on credit demand and increase provisioning needs.
Inconsistent Global Economic Recovery to Limit Growth: Uneven global economic recovery remains a key challenge in 2026, which will likely create significant differences in growth and profitability across foreign banks. While some economies, particularly the United States and parts of Asia, have returned to relatively stable growth, many regions are still contending with the lingering effects of the pandemic, including weak consumer spending, subdued business investment and elevated debt levels. At the same time, geopolitical tensions, trade disruptions and persistent inflationary pressures continue to weigh on economic activity in Europe, China and several emerging markets. Because banks’ earnings are closely tied to the health of the broader economy, slower growth can limit loan demand from households and businesses, reducing opportunities for balance sheet expansion and revenue growth.
Continued Restructuring Efforts to Boost Profitability: 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 NIMs 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.
Zacks Industry Rank Indicates Dismal Prospects
The Zacks Foreign Banks Industry is an 83-stock group within the broader Zacks Finance Sector. The industry currently carries a Zacks Industry Rank #146, which places it at the bottom 40% 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 underperformance 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 bottom 50% of the Zacks-ranked industries is because of a dismal earnings outlook for the constituent companies in aggregate. The aggregate earnings estimate revisions show that analysts are losing confidence in this group’s growth potential. Since May 2025-end, the industry’s most recent earnings estimates for 2026 have been revised 1% lower.
Despite near-term industry challenges, we present a few stocks from the industry that you may want to consider for long-term gains. 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 65.1%. The S&P 500 composite has rallied 45.1% and the Zacks Finance Sector has appreciated 30.3%.
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 2.94X. This compares with the highest level of 3.52X, the lowest level of 1.43X and the median of 1.80X 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 11.82X, 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 5.41X and the median level of 4.79X for the same period are above the Zacks Foreign Banks Industry’s ratios.
Price-to-Tangible Book Ratio (TTM)
3 Foreign Bank Stocks to Keep an Eye On
HSBC: Headquartered in London, HSBC is a major global banking and financial services firm, with $3.3 trillion in assets as of March 31, 2026. For a long time now, HSBC has been expanding across Asia with a focus on high-net-worth and ultra-high-net-worth clients.
In mainland China, it has been building its wealth franchise through lifestyle-focused centers, acquisitions such as Citigroup’s retail wealth arm, digital upgrades and talent hires. The completed privatization of Hang Seng Bank will simplify ownership and support plans to capture revenues and cost synergies across both brands by 2028. In India, HSBC is expanding rapidly, with approval to open 20 branches, while boosting presence through initiatives like the launch of Global Private Banking, the buyout of L&T Investment Management and the expansion of Premier Banking.
The bank has been executing a multi-year restructuring aimed at lifting returns and sharpening its footprint. Management remains on track to deliver $1.5 billion in annualized organizational simplification savings by the end of June 2026 (six months ahead of schedule), after actioning additional savings in the first quarter of 2026 and building cumulative year-over-year benefits through 2026. In parallel, HSBC aims to redeploy $1.8 billion of additional costs saved from non-strategic activities into priority growth areas over the medium term, including investments in technology and artificial intelligence to improve the operating model and customer experience.
Aligning with these efforts, portfolio actions are progressing well. This year, HSBC completed the privatization of Hang Seng Bank and sales of U.K. life insurance, South Africa and Sri Lanka retail banking, reclassified Malta to held for sale and agreed to sell Indonesia retail banking. Further, strategic reviews of retail businesses in Australia and Egypt, and HSBC Life Singapore, are underway. These moves support a simpler organizational structure, though they create near-term revenue noise as businesses exit or move to held for sale.
Shares of the company have risen 27% on the NYSE in the past six months. The Zacks Consensus Estimate for its 2026 earnings has been unchanged in the past seven days. Currently, HSBC carries a Zacks Rank #3 (Hold).
Price & Consensus: HSBC
UBS Group: Headquartered in Zurich, Switzerland, this Zacks Ranked #3 company has, for years, fortified its footprint and expanded operations on the back of partnerships and buyouts. In June 2023, it completed the regulatory-assisted acquisition of Credit Suisse. In May 2024, it completed the merger with Credit Suisse, integrating clients and operations over time. UBS Group has entered the final phase of the Credit Suisse integration, including the decommissioning of legacy IT infrastructure, which is expected to continue this year.
In April 2025, UBS partnered with 360 ONE WAM, selling its Indian wealth business while acquiring a 4.95% stake, with Singapore-based clients continuing to be served by UBS Singapore. In March 2026, UBS Bank USA converted to a national bank charter, enabling the company to expand its banking and wealth management offerings across the United States.
UBS Group’s NII has seen a compound annual growth rate (CAGR) of 5.7% over the last five years (ending 2025). In the first quarter of 2026, the metric increased 42.4% year over year to $2.32 billion, driven by favorable changes in deposit mix and positive foreign currency effects. Going forward, repricing efforts, deposit cost management and an improvement in loan demand are expected to continue driving the top line.
However, the company’s escalating expense base is concerning, as it exposes it to operational risks. Expenses witnessed a CAGR of 10.7% in the five years ended 2025, with the uptrend continuing in the first quarter of 2026. The company expects to incur cumulative integration-related expenses of $15 billion by the end of 2026, while assuming constant foreign-exchange rates. In the first quarter of 2026, UBS Group incurred integration-related expenses and purchase price allocation effects of $0.75 billion. Management expects these expenses to be $0.7 billion in the second quarter of 2026.
Shares of UBS Group have gained 19.7% on the NYSE in the past six months. The Zacks Consensus Estimate for the company’s 2026 earnings has been unchanged in the past seven days.
Price & Consensus: UBS
Barclays: Headquartered in London, BCS is a major global banking and financial services company with £1,694.8 billion ($2,239.8 billion) in total assets as of March 31, 2026. With a clear emphasis on sharpening focus on core businesses, Barclays has been bolstering its market position through targeted acquisitions, partnerships and portfolio actions.
On May 1, 2026, it completed the deal to acquire the U.S.-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. These initiatives, along with others, are expected to support an improvement in profitability over time.
After years of subdued performance, Barclays’ core operating metrics have started witnessing improvement. Its total income saw a three-year (2022-2025) compound annual growth rate (CAGR) of 5.3%, with the uptrend continuing in the first quarter of 2026. 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 carries a Zacks Rank of 3. BCS shares have gained 6.8% on the NYSE in the past six months. The Zacks Consensus Estimate for the company’s 2026 earnings has been unchanged in the past seven days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price & Consensus: BCS
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3 Foreign Bank Stocks to Keep an Eye on Despite Industry Headwinds
The Zacks Foreign Banks Industry is likely to operate in a mixed and increasingly divergent environment in 2026. A fragmented global interest rate backdrop will create uneven net interest income (NII) and margin trends. At the same time, uneven global economic recovery could dampen loan demand and elevate credit risks in regions where growth remains subdued.
Against this backdrop, ongoing restructuring efforts, including portfolio optimization, cost reductions and greater investment in high-growth businesses, should help improve efficiency, strengthen profitability and position banks like HSBC Holdings (HSBC - Free Report) , UBS Group (UBS - Free Report) and Barclays PLC (BCS - Free Report) for sustainable long-term growth despite macroeconomic uncertainty.
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, these 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 Themes Impacting the Foreign Banks Industry
Fragmented Interest Rate Environment to Create Uneven NII Growth: This year, the world is not experiencing a coordinated cycle of interest rate cuts. Some central banks are easing rates, while many, including the Federal Reserve and Bank of England, are on hold. In fact, the European Central Bank and Bank of Japan are viewed as becoming more hawkish in 2026, with the ECB signaling that persistent energy-driven inflation could warrant at least one rate hike and the Bank of Japan shifting toward tighter policy as wage growth and domestic inflation strengthen. This fragmented global interest rate environment is expected to produce uneven NII and net interest margin (NIM) trends for banks.
In regions where rates are being cut, loan yields are expected to decline faster than funding costs, putting pressure on margins and slowing NII growth. Deposit pricing may remain sticky as banks continue competing for customer balances, compressing spreads. In contrast, banks operating in markets where central banks are holding rates steady or maintaining a hawkish stance could continue to benefit from relatively strong asset yields and favorable reinvestment opportunities. These conditions will likely support more resilient NIM and healthier NII growth, although persistently high borrowing costs may weigh on credit demand and increase provisioning needs.
Inconsistent Global Economic Recovery to Limit Growth: Uneven global economic recovery remains a key challenge in 2026, which will likely create significant differences in growth and profitability across foreign banks. While some economies, particularly the United States and parts of Asia, have returned to relatively stable growth, many regions are still contending with the lingering effects of the pandemic, including weak consumer spending, subdued business investment and elevated debt levels. At the same time, geopolitical tensions, trade disruptions and persistent inflationary pressures continue to weigh on economic activity in Europe, China and several emerging markets. Because banks’ earnings are closely tied to the health of the broader economy, slower growth can limit loan demand from households and businesses, reducing opportunities for balance sheet expansion and revenue growth.
Continued Restructuring Efforts to Boost Profitability: 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 NIMs 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.
Zacks Industry Rank Indicates Dismal Prospects
The Zacks Foreign Banks Industry is an 83-stock group within the broader Zacks Finance Sector. The industry currently carries a Zacks Industry Rank #146, which places it at the bottom 40% 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 underperformance 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 bottom 50% of the Zacks-ranked industries is because of a dismal earnings outlook for the constituent companies in aggregate. The aggregate earnings estimate revisions show that analysts are losing confidence in this group’s growth potential. Since May 2025-end, the industry’s most recent earnings estimates for 2026 have been revised 1% lower.
Despite near-term industry challenges, we present a few stocks from the industry that you may want to consider for long-term gains. 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 65.1%. The S&P 500 composite has rallied 45.1% and the Zacks Finance Sector has appreciated 30.3%.
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 2.94X. This compares with the highest level of 3.52X, the lowest level of 1.43X and the median of 1.80X 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 11.82X, 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 5.41X and the median level of 4.79X for the same period are above the Zacks Foreign Banks Industry’s ratios.
Price-to-Tangible Book Ratio (TTM)
3 Foreign Bank Stocks to Keep an Eye On
HSBC: Headquartered in London, HSBC is a major global banking and financial services firm, with $3.3 trillion in assets as of March 31, 2026. For a long time now, HSBC has been expanding across Asia with a focus on high-net-worth and ultra-high-net-worth clients.
In mainland China, it has been building its wealth franchise through lifestyle-focused centers, acquisitions such as Citigroup’s retail wealth arm, digital upgrades and talent hires. The completed privatization of Hang Seng Bank will simplify ownership and support plans to capture revenues and cost synergies across both brands by 2028. In India, HSBC is expanding rapidly, with approval to open 20 branches, while boosting presence through initiatives like the launch of Global Private Banking, the buyout of L&T Investment Management and the expansion of Premier Banking.
The bank has been executing a multi-year restructuring aimed at lifting returns and sharpening its footprint. Management remains on track to deliver $1.5 billion in annualized organizational simplification savings by the end of June 2026 (six months ahead of schedule), after actioning additional savings in the first quarter of 2026 and building cumulative year-over-year benefits through 2026. In parallel, HSBC aims to redeploy $1.8 billion of additional costs saved from non-strategic activities into priority growth areas over the medium term, including investments in technology and artificial intelligence to improve the operating model and customer experience.
Aligning with these efforts, portfolio actions are progressing well. This year, HSBC completed the privatization of Hang Seng Bank and sales of U.K. life insurance, South Africa and Sri Lanka retail banking, reclassified Malta to held for sale and agreed to sell Indonesia retail banking. Further, strategic reviews of retail businesses in Australia and Egypt, and HSBC Life Singapore, are underway. These moves support a simpler organizational structure, though they create near-term revenue noise as businesses exit or move to held for sale.
Shares of the company have risen 27% on the NYSE in the past six months. The Zacks Consensus Estimate for its 2026 earnings has been unchanged in the past seven days. Currently, HSBC carries a Zacks Rank #3 (Hold).
Price & Consensus: HSBC
UBS Group: Headquartered in Zurich, Switzerland, this Zacks Ranked #3 company has, for years, fortified its footprint and expanded operations on the back of partnerships and buyouts. In June 2023, it completed the regulatory-assisted acquisition of Credit Suisse. In May 2024, it completed the merger with Credit Suisse, integrating clients and operations over time. UBS Group has entered the final phase of the Credit Suisse integration, including the decommissioning of legacy IT infrastructure, which is expected to continue this year.
In April 2025, UBS partnered with 360 ONE WAM, selling its Indian wealth business while acquiring a 4.95% stake, with Singapore-based clients continuing to be served by UBS Singapore. In March 2026, UBS Bank USA converted to a national bank charter, enabling the company to expand its banking and wealth management offerings across the United States.
UBS Group’s NII has seen a compound annual growth rate (CAGR) of 5.7% over the last five years (ending 2025). In the first quarter of 2026, the metric increased 42.4% year over year to $2.32 billion, driven by favorable changes in deposit mix and positive foreign currency effects. Going forward, repricing efforts, deposit cost management and an improvement in loan demand are expected to continue driving the top line.
However, the company’s escalating expense base is concerning, as it exposes it to operational risks. Expenses witnessed a CAGR of 10.7% in the five years ended 2025, with the uptrend continuing in the first quarter of 2026. The company expects to incur cumulative integration-related expenses of $15 billion by the end of 2026, while assuming constant foreign-exchange rates. In the first quarter of 2026, UBS Group incurred integration-related expenses and purchase price allocation effects of $0.75 billion. Management expects these expenses to be $0.7 billion in the second quarter of 2026.
Shares of UBS Group have gained 19.7% on the NYSE in the past six months. The Zacks Consensus Estimate for the company’s 2026 earnings has been unchanged in the past seven days.
Price & Consensus: UBS
Barclays: Headquartered in London, BCS is a major global banking and financial services company with £1,694.8 billion ($2,239.8 billion) in total assets as of March 31, 2026. With a clear emphasis on sharpening focus on core businesses, Barclays has been bolstering its market position through targeted acquisitions, partnerships and portfolio actions.
On May 1, 2026, it completed the deal to acquire the U.S.-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. These initiatives, along with others, are expected to support an improvement in profitability over time.
After years of subdued performance, Barclays’ core operating metrics have started witnessing improvement. Its total income saw a three-year (2022-2025) compound annual growth rate (CAGR) of 5.3%, with the uptrend continuing in the first quarter of 2026. 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 carries a Zacks Rank of 3. BCS shares have gained 6.8% on the NYSE in the past six months. The Zacks Consensus Estimate for the company’s 2026 earnings has been unchanged in the past seven days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price & Consensus: BCS