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 7.6% return has trailed the S&P 500 by 7.9 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. Taking that into account, here is one bank stock poised to generate sustainable market-beating returns and two we’re passing on.
Two Bank Stocks to Sell:
Texas Capital Bank (TCBI)
Market Cap: $3.92 billion
Founded during the Texas banking renaissance of the 1990s with an entrepreneurial spirit, Texas Capital Bancshares (NASDAQ: TCBI) is a financial services firm that provides banking, wealth management, and investment banking services to businesses and individuals across Texas and beyond.
Why Are We Hesitant About TCBI?
- Annual net interest income growth of 2.2% over the last five years was below our standards for the banking sector
- Weak unit economics are reflected in its net interest margin of 3.1%, one of the worst among bank companies
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 11.1% annually
Texas Capital Bank is trading at $85.69 per share, or 1.2x forward P/B. Dive into our free research report to see why there are better opportunities than TCBI.
Simmons First National (SFNC)
Market Cap: $2.86 billion
With roots dating back to 1903 and a presence across Arkansas, Kansas, Missouri, Oklahoma, Tennessee, and Texas, Simmons First National (NASDAQ: SFNC) is a regional bank holding company that provides banking and financial services to individuals and businesses.
Why Should You Sell SFNC?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 4.9% annually over the last two years
- Net interest income stagnated over the last five years and signal the need for new growth strategies
- Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 11.8% annually, worse than its revenue
At $20.10 per share, Simmons First National trades at 0.7x forward P/B. Check out our free in-depth research report to learn more about why SFNC doesn’t pass our bar.
One Bank Stock to Buy:
Western Alliance Bancorporation (WAL)
Market Cap: $9.77 billion
Operating through five distinct regional banking divisions across the western United States, Western Alliance Bancorporation (NYSE: WAL) provides commercial banking, treasury management, mortgage services, and specialized financial solutions through its banking divisions and subsidiaries.
Why Do We Love WAL?
- Impressive 18.9% annual net interest income growth over the last five years indicates it’s winning market share this cycle
- Earnings growth has massively outpaced its peers over the last five years as its EPS has compounded at 11.6% annually
- Impressive 15% annual tangible book value per share growth over the last five years indicates it’s building equity value this cycle
Western Alliance Bancorporation’s stock price of $89.70 implies a valuation ratio of 1.3x forward P/B. Is now the time to initiate a position? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at Top 9 Market-Beating Stocks. 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.
