Banks use their capital and expertise to help businesses grow while offering consumers essential financial products like mortgages and credit cards. Still, investors are uneasy as banks face challenges from credit quality concerns and potential regulatory changes. These doubts have certainly contributed to banking stocks’ recent underperformance - over the past six months, the industry’s 7.7% gain has fallen behind the S&P 500’s 16.2% rise.

Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. With that said, here is one bank stock poised to generate sustainable market-beating returns and two we’re passing on.

Two Bank Stocks to Sell:

Merchants Bancorp (MBIN)

Market Cap: $1.47 billion

With a strategic focus on low-risk, government-backed lending programs, Merchants Bancorp (NASDAQCM:MBIN) is an Indiana-based bank holding company specializing in multi-family mortgage banking, mortgage warehousing, and traditional banking services.

Why Are We Wary of MBIN?

1. Inferior net interest margin of 3% means it must compensate for lower profitability through increased loan originations
2. Costs have risen faster than its revenue over the last four years, causing its efficiency ratio to worsen by 15.3 percentage points
3. Insufficient tier one capital ratio of 8.6% leaves little margin for error in meeting regulatory liquidity requirements

At $32 per share, Merchants Bancorp trades at 0.8x forward P/B. Dive into our free research report to see why there are better opportunities than MBIN.

PNC Financial Services Group (PNC)

Market Cap: $79.99 billion

Tracing its roots back to 1852 when Pittsburgh's industrial boom demanded stronger financial institutions, PNC (NYSE: PNC) is a diversified financial institution that provides retail banking, corporate banking, and asset management services through a coast-to-coast branch network.

Why Does PNC Worry Us?

1. Large revenue base makes it harder to expand quickly, and its annual net interest income growth of 6.9% over the last five years was below our standards for the banking sector
2. Weak unit economics are reflected in its net interest margin of 2.7%, one of the worst among bank companies
3. Estimated tangible book value per share decline of 5.3% for the next 12 months implies a challenging profitability environment

PNC Financial Services Group is trading at $203.12 per share, or 1.5x forward P/B. Check out our free in-depth research report to learn more about why PNC doesn’t pass our bar.

One Bank Stock to Watch:

Old National Bank (ONB)

Market Cap: $8.57 billion

Tracing its roots back to 1834 when Andrew Jackson was president, Old National Bancorp (NASDAQ: ONB) is a bank holding company that provides commercial and consumer loans, deposit services, wealth management, and treasury solutions primarily throughout the Midwest region.

Why Do We Like ONB?

1. Annual net interest income growth of 25.5% over the past five years was outstanding, reflecting market share gains this cycle
2. Exciting net interest income outlook for the upcoming 12 months calls for 40.6% growth, an acceleration from its five-year trend
3. Efficiency ratio improvement of -3.7 percentage points is projected for next year as the firm achieves greater operating leverage

Old National Bank’s stock price of $21.88 implies a valuation ratio of 1.1x forward P/B. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.

High-Quality Stocks for All Market Conditions

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

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