Banks use their capital and expertise to help businesses grow while offering consumers essential financial products like mortgages and credit cards. But worries about an economic slowdown and potential credit deterioration have kept sentiment in check, and over the past six months, the banking industry’s 18.8% return has trailed the S&P 500 by 4.1 percentage points.
Investors should tread carefully as many of these banks are also cyclical, and any misstep can have you catching a falling knife. With that said, here are three bank stocks best left ignored.
Seacoast Banking (SBCF)
Market Cap: $2.65 billion
Founded during the Florida land boom of 1926 and surviving the Great Depression, Seacoast Banking Corporation of Florida (NASDAQ: SBCF) is a financial holding company that provides commercial and retail banking, wealth management, and mortgage services throughout Florida.
Why Does SBCF Give Us Pause?
- Annual revenue growth of 1% over the last two years was below our standards for the banking sector
- Muted 2.8% annual tangible book value per share growth over the last five years shows its capital generation lagged behind its banking peers
- Tangible book value per share is projected to decrease by 5.5% over the next 12 months as capital generation weakens
Seacoast Banking is trading at $30.57 per share, or 1.2x forward P/B. Dive into our free research report to see why there are better opportunities than SBCF.
First Hawaiian Bank (FHB)
Market Cap: $3.01 billion
Dating back to 1858 as Hawaii's oldest bank with deep roots in the Pacific island communities, First Hawaiian (NASDAQ: FHB) operates a full-service community bank providing deposit accounts, commercial and consumer loans, credit cards, and wealth management services across Hawaii, Guam, and Saipan.
Why Is FHB Not Exciting?
- Net interest income trends were unexciting over the last five years as its 4% annual growth was below the typical banking firm
- Net interest margin of 3% is well below other banks, signaling its loans aren’t very profitable
- Flat tangible book value per share over the last five years suggest it must find different ways to enhance shareholder value during this cycle
First Hawaiian Bank’s stock price of $24.16 implies a valuation ratio of 1.1x forward P/B. If you’re considering FHB for your portfolio, see our FREE research report to learn more.
First Busey (BUSE)
Market Cap: $2.03 billion
Tracing its roots back to 1868 during America's post-Civil War reconstruction era, First Busey (NASDAQ: BUSE) is a bank holding company that provides commercial and retail banking, wealth management, and payment technology solutions across Illinois, Missouri, Florida, and Indiana.
Why Are We Hesitant About BUSE?
- Inferior net interest margin of 3% means it must compensate for lower profitability through increased loan originations
- Day-to-day expenses have swelled relative to revenue over the last four years as its efficiency ratio increased by 4.7 percentage points
- Estimated tangible book value per share decline of 2.1% for the next 12 months implies a challenging profitability environment
At $22.79 per share, First Busey trades at 0.9x forward P/B. Read our free research report to see why you should think twice about including BUSE in your portfolio.
Stocks We Like More
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