Banks serve as the backbone of the economy, facilitating lending, deposits, and financial services that keep businesses and consumers moving forward. 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 2.8% return has trailed the S&P 500 by 11.5 percentage points.

Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. Keeping that in mind, here is one bank stock boasting a durable advantage and two best left ignored.

Two Bank Stocks to Sell:

First Merchants (FRME)

Market Cap: $2.09 billion

Dating back to 1893 when it first opened its doors in Indiana, First Merchants (NASDAQ: FRME) is a Midwest regional bank providing commercial, consumer, and wealth management services through branches in Indiana, Ohio, Michigan, and Illinois.

Why Does FRME Give Us Pause?

1. Flat sales over the last two years suggest it must find different ways to grow during this cycle
2. 7.1% annual net interest income growth over the last five years was slower than its banking peers
3. Net interest margin dropped by 18.3 basis points (100 basis points = 1 percentage point) over the last two years, implying the firm’s loan book profitability fell as competitors entered the market

First Merchants’s stock price of $36.03 implies a valuation ratio of 0.9x forward P/B. Read our free research report to see why you should think twice about including FRME in your portfolio.

Truist Financial (TFC)

Market Cap: $57.99 billion

Born from the 2019 merger of BB&T and SunTrust in one of the largest banking combinations since the 2008 financial crisis, Truist Financial (NYSE: TFC) is a bank holding company that offers a wide range of financial services including consumer and commercial banking, wealth management, insurance, and lending solutions.

Why Are We Wary of TFC?

1. Sizable revenue base leads to growth challenges as its 2.5% annual net interest income increases over the last five years fell short of other banking companies
2. Net interest margin of 3% is well below other banks, signaling its loans aren’t very pSrofitable
3. Flat earnings per share over the last five years underperformed the sector average

Truist Financial is trading at $45.06 per share, or 1x forward P/B. If you’re considering TFC for your portfolio, see our FREE research report to learn more.

One Bank Stock to Watch:

Frost Bank (CFR)

Market Cap: $7.87 billion

Tracing its roots back to 1868 when it was founded during Texas's post-Civil War reconstruction era, Cullen/Frost Bankers (NYSE: CFR) operates Frost Bank, a Texas-based financial institution providing commercial and consumer banking, wealth management, and insurance services.

Why Is CFR Interesting?

1. Annual net interest income growth of 12.1% over the past five years was outstanding, reflecting market share gains this cycle
2. Incremental sales over the last five years have been highly profitable as its earnings per share increased by 11% annually, topping its revenue gains
3. Annual tangible book value per share growth of 23.2% over the last two years was superb and indicates its capital strength increased during this cycle

At $123.28 per share, Frost Bank trades at 1.8x forward P/B. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free for active Edge members .

Stocks We Like Even More

Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.

The names generating the next wave of massive growth are right here in our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free.

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