The banking sector was an unexpectedly great place to invest in 2024.

Despite major brokers declaring the big four banks as overvalued, the sector raced higher and played a key role in the ASX 200 index's above-average performance over the 12 months.

But which ASX 200 bank shares were the best performers? Let's look at the top three:

Judo Capital Holdings Ltd (ASX: JDO)

The Judo Capital share price was the best performer in the banking sector with an impressive gain of approximately 82%.

This small business lender caught the eye of investors with a strong performance in FY 2024.

In FY 2024, Judo Capital reported a 20% increase in gross loans and advances (GLA) to $10.7 billion, a net interest margin (NIM) of 2.94%, and a 2% lift in underlying profit before tax to $110.1 million. The latter was in line with its guidance, which management revealed reflects above-system lending growth at strong margins, prudent management of costs, and a fundamental shift in the bank's funding mix.

The ASX 200 bank share also revealed that strong growth is expected in FY 2025. It is targeting a 15% increase in profit before tax for the year.

AMP Ltd (ASX: AMP)

The AMP share price wasn't too far behind with a 71% gain in 2024.

Investors were buying the banking, superannuation, retirement and financial advice services provider's shares last year for a number of reasons.

The first was a much-improved performance in FY 2024, which saw the ASX 200 bank share report a 4% decline in first half revenue to $641 million but a 5.4% increase in underlying net profit after tax to $118 million.

AMP also announced a new strategic partnership and ownership structure with Entireti and AZ Next Generation Advisory (AZ NGA) for its AMP Advice business. Management believes this could transform the advice industry landscape in Australia.

Commonwealth Bank of Australia (ASX: CBA)

The CBA share price was on form and raced 37% higher in 2024.

This was all the more impressive given how Australia's largest bank was regarded as the most expensive bank stock in the world at the start of last year.

Investors were buying its shares following a solid showing in FY 2024. In August, CBA reported flat operating income of $27.174 billion and a 2% decline in cash net profit after tax to $9.836 billion. This was better than the market was expecting and allowed CBA to pay a larger than forecast dividend in FY 2025.