Banks play a critical role in the financial system, providing everything from commercial loans to wealth management and payment processing services. These institutions have benefited from improved net interest margins and robust credit growth, so it’s no surprise the banking industry has posted a 11.1% gain over the past six months, beating the S&P 500 by 4.9 percentage points.
Although banks have produced good results, only a handful will thrive over the long term as fintech disruptors are rapidly taking market share from traditional institutions. Taking that into account, here is one resilient bank stock at the top of our wish list and two that may face trouble.
Two Bank Stocks to Sell:
Citizens Financial Group (CFG)
Market Cap: $28.13 billion
Tracing its roots back to 1828 as a community-focused institution, Citizens Financial Group (NYSE: CFG) is a regional bank that provides retail and commercial banking services to individuals, small businesses, and large corporations across 14 states.
Why Does CFG Fall Short?
- Muted 2.6% annual revenue growth over the last two years shows its demand lagged behind its banking peers
- Muted 5.8% annual net interest income growth over the last five years shows its demand lagged behind its banking peers
- Performance over the past five years shows its incremental sales were less profitable, as its 2.5% annual earnings per share growth trailed its revenue gains
At $71.05 per share, Citizens Financial Group trades at 1.2x forward P/B. Dive into our free research report to see why there are better opportunities than CFG.
Ameris Bancorp (ABCB)
Market Cap: $5.83 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 6.4% for the next 12 months is soft and implies weaker demand
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 3.1% annually
Ameris Bancorp’s stock price of $89.91 implies a valuation ratio of 1.4x forward P/B. Read our free research report to see why you should think twice about including ABCB in your portfolio.
One Bank Stock to Buy:
The Bancorp (TBBK)
Market Cap: $2.35 billion
Operating behind the scenes of many popular fintech apps and prepaid cards you might use daily, The Bancorp (NASDAQ: TBBK) is a bank holding company that specializes in providing banking services to fintech companies and offering specialty lending products.
Why Do We Love TBBK?
- Solid 12.6% annual net interest income growth over the last five years indicates its offerings are gaining share
- Share repurchases over the last five years enabled its annual earnings per share growth of 26.3% to outpace its revenue gains
- ROE punches in at 24.7%, illustrating management’s expertise in identifying profitable investments
The Bancorp is trading at $61.91 per share, or 3.3x forward P/B. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
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