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 has tumbled by 11%. This drawdown was seriously disheartening since the S&P 500 stood firm.
While some banks have strong balance sheets and diversified revenue streams that enable them to thrive in any environment, the odds aren't great for the ones we're analyzing today. Keeping that in mind, here are three bank stocks best left ignored.
The Bancorp (TBBK)
Market Cap: $2.34 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 Are We Hesitant About TBBK?
- Estimated net interest income growth of 4.6% for the next 12 months implies demand will slow from its four-year trend
- Low interest coverage ratio indicates the company may struggle to service its debt obligations if operational performance deteriorates
The Bancorp’s stock price of $50.86 implies a valuation ratio of 2.5x forward P/B. Read our free research report to see why you should think twice about including TBBK in your portfolio.
First Busey (BUSE)
Market Cap: $2.00 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 Does BUSE Worry Us?
- Muted 5.9% annual net interest income growth over the last four years shows its demand lagged behind its bank peers
- Net interest margin of 2.9% is well below other banks, signaling its loans aren’t very profitable
- Efficiency ratio improved by 9.1 percentage points over the last four years as it scaled
First Busey is trading at $22.25 per share, or 0.9x forward P/B. If you’re considering BUSE for your portfolio, see our FREE research report to learn more.
Community Bank (CBU)
Market Cap: $2.90 billion
Tracing its roots back to 1866 in upstate New York, Community Financial System (NYSE: CBU) is a financial holding company that provides banking, employee benefits, wealth management, and insurance services to retail, commercial, and municipal customers.
Why Is CBU Not Exciting?
- Muted 5.6% annual net interest income growth over the last four years shows its demand lagged behind its bank peers
- Weak unit economics are reflected in its net interest margin of 3.1%, one of the worst among bank companies
- Loan losses and capital returns have eroded its tangible book value this cycle as its tangible book value per share declined by 4.3% annually over the last five years
At $54.91 per share, Community Bank trades at 1.5x forward P/B. Dive into our free research report to see why there are better opportunities than CBU.
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