Banks serve as the backbone of the economy, facilitating lending, deposits, and financial services that keep businesses and consumers moving forward. Furthermore, economic conditions have supported loan growth and fee income, a trend that has enabled the banking industry to return 11.1% over the past six months. At the same time, the S&P 500 was up 6.2%.
Nevertheless, investors should tread carefully as many banks are cyclical due to their exposure to credit risk and regulatory changes. With that said, here is one bank stock poised to generate sustainable market-beating returns and two best left ignored.
Two Bank Stocks to Sell:
CVB Financial (CVBF)
Market Cap: $3.69 billion
With roots dating back to 1974 and a focus on serving small and medium-sized businesses, CVB Financial (NASDAQ: CVBF) operates Citizens Business Bank, providing banking, lending, and trust services to businesses and individuals across California.
Why Should You Sell CVBF?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 2% annually over the last two years
- Muted 2% annual net interest income growth over the last five years shows its demand lagged behind its banking peers
- Earnings per share have contracted by 2.7% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
CVB Financial’s stock price of $22.46 implies a valuation ratio of 1.2x forward P/B. Read our free research report to see why you should think twice about including CVBF in your portfolio.
Flagstar Financial (FLG)
Market Cap: $6.06 billion
Tracing its roots back to 1859 and rebranded from New York Community Bancorp in 2024, Flagstar Financial (NYSE: FLG) is a bank holding company that offers commercial and consumer banking services, with specialties in multi-family lending, mortgage originations, and warehouse lending.
Why Do We Pass on FLG?
- 8.4% annual net interest income growth over the last five years was slower than its banking peers
- Earnings per share fell by 15.3% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Tangible book value per share tumbled by 6.9% annually over the last five years, showing banking sector trends are working against it during this cycle
Flagstar Financial is trading at $15.12 per share, or 0.8x forward P/B. To fully understand why you should be careful with FLG, check out our full research report (it’s free).
One Bank Stock to Watch:
Stock Yards Bank (SYBT)
Market Cap: $2.32 billion
Founded in 1904 in Louisville and named after the city's historic livestock market district, Stock Yards Bancorp (NASDAQ: SYBT) operates a regional bank providing commercial banking, wealth management, and trust services across Kentucky, Indiana, and Ohio.
Why Are We Positive on SYBT?
- Market share has increased this cycle as its 16.9% annual net interest income growth over the last five years was exceptional
- Net interest income outlook for the upcoming 12 months is outstanding and shows it’s on track to gain market share
- Annual tangible book value per share growth of 10.1% over the past five years was outstanding, reflecting strong capital accumulation this cycle
At $75.86 per share, Stock Yards Bank trades at 1.8x forward P/B. Is now the right time to buy? Find out in our full research report, it’s free.
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