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 8.5% return has trailed the S&P 500 by 3.1 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. On that note, here is one bank stock poised to generate sustainable market-beating returns and two that may face trouble.

Two Bank Stocks to Sell:

First Interstate BancSystem (FIBK)

Market Cap: $3.41 billion

Tracing its roots back to 1971 and still guided by founding family principles, First Interstate BancSystem (NASDAQ: FIBK) operates a network of community banks across 14 western and midwestern states, offering comprehensive banking services to individuals, businesses, and government entities.

Why Do We Think FIBK Will Underperform?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 4.6% annually over the last two years
2. Performance over the past two years shows each sale was less profitable as its earnings per share dropped by 17.4% annually, worse than its revenue
3. 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 Interstate BancSystem’s stock price of $32.48 implies a valuation ratio of 1x forward P/B. Check out our free in-depth research report to learn more about why FIBK doesn’t pass our bar.

Walker & Dunlop (WD)

Market Cap: $2.79 billion

Originating as a small mortgage banking firm during the Great Depression in 1937, Walker & Dunlop (NYSE: WD) provides commercial real estate financing, property sales, appraisal, and investment management services with a focus on multifamily properties.

Why Does WD Fall Short?

1. Net interest income tumbled by 56.7% annually over the last five years, showing market trends are working against its favor during this cycle
2. Earnings per share fell by 6% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
3. Loan losses and capital returns have eroded its tangible book value per share this cycle as its tangible book value per share declined by 4.5% annually over the last five years

At $82.01 per share, Walker & Dunlop trades at 1.5x forward P/B. Dive into our free research report to see why there are better opportunities than WD.

One Bank Stock to Watch:

First Commonwealth Financial (FCF)

Market Cap: $1.84 billion

Tracing its roots back to the Great Depression era of 1934, First Commonwealth Financial (NYSE: FCF) is a financial holding company that provides consumer and commercial banking, wealth management, and insurance services across Pennsylvania and Ohio.

Why Could FCF Be a Winner?

1. Demand will likely accelerate over the next 12 months as its forecasted net interest income growth of 11.2% is above its five-year trend
2. Performance over the past five years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 9.6% outpaced its revenue gains
3. ROE punches in at 11.4%, illustrating management’s expertise in identifying profitable investments

First Commonwealth Financial is trading at $17.68 per share, or 1.2x forward P/B. Is now a good time to buy? Find out in our full 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.

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