Banks use their capital and expertise to help businesses grow while offering consumers essential financial products like mortgages and credit cards. Market leaders have certainly capitalized on rising interest rates and strong loan demand to boost profitability, helping fuel a 11.3% gain for the banking industry over the past six months - 6.3 percentage points higher than the S&P 500.
Regardless of these results, investors must exercise caution as many banks are sensitive to interest rate fluctuations and economic cycles. Taking that into account, here are three bank stocks that may face trouble.
United Bankshares (UBSI)
Market Cap: $6.13 billion
With roots dating back to 1982 and a strong presence in the Mid-Atlantic region, United Bankshares (NASDAQ: UBSI) is a bank holding company that provides commercial and retail banking services through its United Bank subsidiary across multiple states.
Why Are We Wary of UBSI?
- Net interest income trends were unexciting over the last five years as its 8.8% annual growth was below the typical banking firm
- Earnings per share lagged its peers over the last five years as they only grew by 2.5% annually
- Capital generation will likely be soft over the next 12 months as Wall Street’s estimates imply tepid tangible book value per share growth of 8.2%
United Bankshares is trading at $43.93 per share, or 1.1x forward P/B. Read our free research report to see why you should think twice about including UBSI in your portfolio.
Byline Bancorp (BY)
Market Cap: $1.50 billion
Ranking as the fifth most active Small Business Administration lender in the country, Byline Bancorp (NYSE: BY) is a Chicago-based bank that provides banking services to small and medium-sized businesses, commercial real estate developers, and consumers.
Why Are We Cautious About BY?
- Annual revenue growth of 7.1% over the last two years was below our standards for the banking sector
- Estimated net interest income growth of 1.9% for the next 12 months implies demand will slow from its five-year trend
- Incremental sales over the last two years were less profitable as its 4.6% annual earnings per share growth lagged its revenue gains
At $33.80 per share, Byline Bancorp trades at 1.1x forward P/B. If you’re considering BY for your portfolio, see our FREE research report to learn more.
Ameris Bancorp (ABCB)
Market Cap: $5.76 billion
Tracing its roots back to 1971 and expanding significantly through both organic growth and strategic acquisitions, Ameris Bancorp (NYSE: ABCB) is a financial holding company that provides a full range of banking services to retail and commercial customers across select markets in the southeastern United States.
Why Does ABCB Give Us Pause?
- 7.9% annual net interest income growth over the last five years was slower than its banking peers
- Estimated net interest income growth of 5.4% for the next 12 months implies demand will slow from its five-year trend
- Earnings per share lagged its peers over the last five years as they only grew by 3.1% annually
Ameris Bancorp’s stock price of $84.64 implies a valuation ratio of 1.3x forward P/B. Read our free research report to see why you should think twice about including ABCB in your portfolio.
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