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 4.4% gain has fallen behind the S&P 500’s 9.2% rise.

Investors should tread carefully as many of these banks are also cyclical, and any misstep can have you catching a falling knife. Taking that into account, here are three bank stocks we’re swiping left on.

Byline Bancorp (BY)

Market Cap: $1.33 billion

Ranking as the fifth most active Small Business Administration lender in the country, Byline Bancorp (NYSE: BY) is a Chicago-based bank that provides banking services to small and medium-sized businesses, commercial real estate developers, and consumers.

Why Do We Think Twice About BY?

1. Estimated net interest income growth of 4.6% for the next 12 months implies demand will slow from its five-year trend
2. Concessions to defend its market share have ramped up over the last two years as its net interest margin decreased by 20.3 basis points (100 basis points = 1 percentage point)
3. Anticipated 2.6 percentage point rise in its efficiency ratio suggests its expenses will increase as a percentage of revenue

At $29.05 per share, Byline Bancorp trades at 1.1x forward P/B. If you’re considering BY for your portfolio, see our FREE research report to learn more.

Columbia Financial (CLBK)

Market Cap: $1.58 billion

Founded during the Roaring Twenties in 1926 and headquartered in Fair Lawn, New Jersey, Columbia Financial (NASDAQ: CLBK) operates federally chartered savings banks in New Jersey that offer traditional banking services including loans, deposits, and insurance products.

Why Do We Think CLBK Will Underperform?

1. Loans are facing end-market challenges during this cycle, as seen in its flat net interest income over the last five years
2. Net interest margin shrank by 54 basis points (100 basis points = 1 percentage point) over the last two years, suggesting the profitability of its loan book is decreasing or the market is becoming more competitive
3. Performance over the past two years shows each sale was less profitable as its earnings per share dropped by 26.8% annually, worse than its revenue

Columbia Financial trades at a stock price of $15.08. To fully understand why you should be careful with CLBK, check out our full research report (it’s free).

Wells Fargo (WFC)

Market Cap: $262.6 billion

Founded during the California Gold Rush in 1852 to provide banking and express delivery services to miners and merchants, Wells Fargo (NYSE: WFC) is a diversified financial services company that provides banking, lending, investment, and wealth management services to individuals and businesses.

Why Are We Cautious About WFC?

1. Large revenue base makes it harder to expand quickly, and its annual net interest income growth of 1.8% over the last five years was below our standards for the banking sector
2. Estimated net interest income growth of 5.1% for the next 12 months is soft and implies weaker demand
3. Net interest margin shrank by 36.7 basis points (100 basis points = 1 percentage point) over the last two years, suggesting the profitability of its loan book is decreasing or the market is becoming more competitive

Wells Fargo is trading at $81.91 per share, or 1.6x forward P/B. Read our free research report to see why you should think twice about including WFC in your portfolio.

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 5 Growth Stocks for this month. 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).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.