Banks use their capital and expertise to help businesses grow while offering consumers essential financial products like mortgages and credit cards. These institutions have benefited from improved net interest margins and robust credit growth, so it’s no surprise the banking industry has posted a 13.7% gain over the past six months, beating the S&P 500 by 5.2 percentage points.
Regardless of these results, investors must exercise caution as many banks are sensitive to interest rate fluctuations and economic cycles. With that said, here are three bank stocks best left ignored.
Old National Bank (ONB)
Market Cap: $9.54 billion
Tracing its roots back to 1834 when Andrew Jackson was president, Old National Bancorp (NASDAQ:ONB) is a bank holding company that provides commercial and consumer loans, deposit services, wealth management, and treasury solutions primarily throughout the Midwest region.
Why Does ONB Fall Short?
- Weak unit economics are reflected in its net interest margin of 3.5%, one of the worst among bank companies
- Annual earnings per share growth of 5.8% underperformed its revenue over the last five years, showing its incremental sales were less profitable
- Muted 4% annual tangible book value per share growth over the last five years shows its capital generation lagged behind its banking peers
Old National Bank is trading at $25.90 per share, or 1.1x forward P/B. Read our free research report to see why you should think twice about including ONB in your portfolio.
Customers Bancorp (CUBI)
Market Cap: $2.61 billion
Originally founded with a "high-tech, high-touch" branch-light banking strategy, Customers Bancorp (NYSE:CUBI) is a bank holding company that provides commercial and consumer banking services through its Customers Bank subsidiary, with a focus on business lending and digital banking.
Why Are We Hesitant About CUBI?
- Muted 7.6% annual revenue growth over the last two years shows its demand lagged behind its banking peers
- Net interest margin of 3.3% is well below other banks, signaling its loans aren’t very profitable
- Annual earnings per share growth of 3.1% underperformed its revenue over the last two years, showing its incremental sales were less profitable
At $79.14 per share, Customers Bancorp trades at 1.1x forward P/B. Dive into our free research report to see why there are better opportunities than CUBI.
Banner Bank (BANR)
Market Cap: $2.27 billion
Founded in 1890 in Walla Walla, Washington, and evolving through more than a century of economic cycles, Banner Corporation (NASDAQ:BANR) operates Banner Bank, providing commercial banking services, loans, and financial products to individuals and businesses across Washington, Oregon, California, Idaho, and Utah.
Why Do We Think Twice About BANR?
- Sales trends were unexciting over the last five years as its 3.1% annual growth was below the typical banking company
- Annual net interest income growth of 4.5% over the last five years was below our standards for the banking sector
- Earnings per share lagged its peers over the last two years as they only grew by 6.4% annually
Banner Bank’s stock price of $66.46 implies a valuation ratio of 1.1x forward P/B. If you’re considering BANR for your portfolio, see our FREE research report to learn more.
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