This year, two major European bank stocks have hit the S&P 500 hard. They still trade for less than 65 cents dollars

It's a wild year for benchmarks Standard & Poor 500 (snpindex: ^gspc). The index began this year and was then crushed, mainly due to concerns about tariffs from U.S. President Donald Trump. The index fell nearly 20% from its late February high, but then Trump announced a 90-day pause when he imposed higher tariffs. It has since made up for most of the losses.

The S&P 500 has only dropped by about 4% (as of May 8), which is not bad, although it may also indicate that the market does not fully reflect the potential struggle. That is to say, encounter difficulties in a market. Two major European bank stocks have hit the S&P 500 this year, and they are still trading relatively cheaply.

Shares of Daewang Bank Barclays (NYSE: BCS) It has risen nearly 23% this year. Barclays has risen 54% over the past year. European banks have performed poorly since the Great Recession, especially compared with their U.S. counterparts. They have been struggling with extremely low interest rates, gross domestic product (GDP) growth and regulated growth. Over the years, interest rates in Europe have been negative, which makes it difficult to make profits under the traditional banking model, which involves borrowing money at low short-term rates and lending at higher long-term rates.

Image source: Getty Images.

Banks are largely seen as a reflection of their operating economies. As the United States appears to close its doors to many trading partners, many expect Europe to invest more in its economy, which could lead to faster GDP growth. The euro zone only saw GDP growth of about 0.9% in 2024. In 2025, S&P Global Economists expect GDP growth to grow to 1.4% in 2026, although not entirely spectacular, which is an improvement, which is an improvement due to the increase in potential military enterprises in Europe.

Another thing to consider is that Barclays and several other EU banks have improved their returns for several years, although they have been largely ignored due to our exceptionalism and the above-mentioned economic struggles. In the first quarter of 2025, Barclays' tangible interest (rotto) was 14%, up from 12.3% a year ago.

The increase can be attributed to the performance of investment banking and Barclays private banking and wealth management departments. Strong volatility in the market can squeeze profits on the bank trading table. However, Barclays' Consumer Bank's performance in the first quarter was not enough.

Ultimately, management believes the company can generate 11% rote memory in 2025. Capital levels have also risen, laying the foundation for capital allocation (including stock repurchases). Barclays' current dividend yield is still about 2.7%. Although it is not always effective, banks that always produce 10% rote will usually receive a 100% valuation of tangible book value (TBV), and the market value of the stock equals tangible shareholder equity. Barclays stock is still well below the TBV per share trading, and if management can continue to execute, a lot of room for long-term upside will be left.

BCS price to tangible book value chart
BCS price YCHARTS to tangible book value data.

Not only German Bank (NYSE: DB) It has been dealing with economic challenges similar to Barclays, which has been dealing with many regulatory issues related to anti-fine (AML) violations.

The bank has paid hundreds of millions of dollars in fines related to the allegations and has not corrected its AML infrastructure quickly enough. By 2023, Deutsche Bank paid a $186 million fine. But Germany's largest bank has also made some progress in the sector. Late last year, German regulator Bafin recalled one of its special monitors that had been placed in the bank to ensure compliance with AML remedies.

Although custody remains, Deutsche Bank has made great financial progress. Management reduces costs and reduces risk-weighted assets, such as loans, to improve capital efficiency. Revenue has also grown at a CAGR of 6.1% since 2021, which is within the management target range. In addition, Deutsche Bank delivered 11.9% rote in the first quarter of 2025, up from 7.4% in the first quarter of 2024.

While the bank now appears to benefit from its outstanding performance in investment banking, the division can fluctuate rapidly in terms of revenue and profitability, management remains confident in its ability to memorize over 10% in 2025.

The capital level of banks is very high. Management also proposed spending €750 million (US$842 million) on stock buybacks, plus dividends, to bring the total allocation to €2.1 billion in the quarter. Management believes that its performance can exceed the annual distribution target of 800 million euros. Deutsche Bank is another dollar stock deal. This also makes stock buybacks very accumulated to increase the bank's TBV, which should help stocks over time.

DB price to tangible book value chart
YCHARTS DB price to tangible book value data.

Before you buy stock at Barclays, consider the following:

this Motley Fool Stock Advisor The analyst team just confirmed what they think is 10 Best Stocks For investors, buying now… Barclays is not one of them. Ten stocks with layoffs could generate monster returns in the coming years.

When to consider Netflix On this list on December 17, 2004...If you invested $1,000 when you suggested, You will have $617,181! * Or when Nvidia This list was listed on April 15, 2005...If you invested $1,000 when you suggested, You will have $719,371! *

Now, it's worth noting Stock ConsultantThe overall average return is 909% - Compared to market impulses 163% For the S&P 500 index. Don't miss the latest top ten list, available when you join Stock Consultant.

View 10 stocks »

*As of May 5, 2025, stock consultant returns

Bram Berkowitz has no position in any of the stocks mentioned. Motley Fool recommends Barclays Plc. Motley Fool has a disclosure policy.

This year, two major European bank stocks have hit the S&P 500 hard. They are still trading for less than 65 cents, originally published by Motley Fool