Banks use their capital and expertise to help businesses grow while offering consumers essential financial products like mortgages and credit cards. Furthermore, economic conditions have supported loan growth and fee income, a trend that has enabled the banking industry to return 17.3% over the past six months. At the same time, the S&P 500 was up 13%.
Regardless of these results, investors must exercise caution as many banks are sensitive to interest rate fluctuations and economic cycles. Taking that into account, here are three bank stocks we’re passing on.
Banner Bank (BANR)
Market Cap: $2.30 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 Does BANR Fall Short?
- Annual net interest income growth of 3.7% over the last five years was below our standards for the banking sector
- Sales over the last two years were less profitable as its earnings per share fell by 6.1% annually while its revenue was flat
- Estimated tangible book value per share growth of 9.4% for the next 12 months implies profitability will slow from its two-year trend
Banner Bank’s stock price of $67.51 implies a valuation ratio of 1.2x forward P/B. Check out our free in-depth research report to learn more about why BANR doesn’t pass our bar.
Ameris Bancorp (ABCB)
Market Cap: $5.30 billion
Tracing its roots back to 1971 and expanding significantly through both organic growth and strategic acquisitions, Ameris Bancorp (NYSE:ABCB) is a financial holding company that provides a full range of banking services to retail and commercial customers across select markets in the southeastern United States.
Why Does ABCB Worry Us?
- Net interest income trends were unexciting over the last five years as its 7.7% annual growth was below the typical banking firm
- Estimated net interest income growth of 5.5% for the next 12 months implies demand will slow from its five-year trend
- Earnings growth underperformed the sector average over the last five years as its EPS grew by just 8.6% annually
Ameris Bancorp is trading at $77.87 per share, or 1.3x forward P/B. Dive into our free research report to see why there are better opportunities than ABCB.
WaFd Bank (WAFD)
Market Cap: $2.58 billion
Founded in 1917 and rebranded from Washington Federal in 2023, WaFd (NASDAQ:WAFD) is a bank holding company that provides lending, deposit services, and insurance through its Washington Federal Bank subsidiary across eight western states.
Why Do We Steer Clear of WAFD?
- Muted 6.9% annual net interest income growth over the last five years shows its demand lagged behind its banking peers
- Net interest margin dropped by 76 basis points (100 basis points = 1 percentage point) over the last two years, implying the firm’s loan book profitability fell as competitors entered the market
- Sales were less profitable over the last two years as its earnings per share fell by 14.8% annually, worse than its revenue declines
At $33.59 per share, WaFd Bank trades at 0.9x forward P/B. Read our free research report to see why you should think twice about including WAFD in your portfolio.
Stocks We Like More
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