Banks play a critical role in the financial system, providing everything from commercial loans to wealth management and payment processing services. But concerns about loan losses and tightening regulations have tempered enthusiasm, limiting the banking industry’s gains to 3.6% over the past six months. This return lagged the S&P 500’s 9.9% climb.
While some banks have strong balance sheets and diversified revenue streams that enable them to thrive in any environment, the odds aren’t great for the ones we’re analyzing today. Keeping that in mind, here are three bank stocks we’re steering clear of.
Prosperity Bancshares (PB)
Market Cap: $6.79 billion
With a network of banking centers spanning the Lone Star State and beyond, Prosperity Bancshares (NYSE:PB) operates full-service banking locations throughout Texas and Oklahoma, offering a wide range of financial products and services to businesses and consumers.
Why Should You Sell PB?
- Annual revenue growth of 1.6% over the last five years was below our standards for the banking sector
- 1.3% annual net interest income growth over the last five years was slower than its banking peers
- Incremental sales over the last five years were less profitable as its earnings per share were flat while its revenue grew
Prosperity Bancshares’s stock price of $69.00 implies a valuation ratio of 0.9x forward P/B. Dive into our free research report to see why there are better opportunities than PB.
Truist Financial (TFC)
Market Cap: $63.63 billion
Born from the 2019 merger of BB&T and SunTrust in one of the largest banking combinations since the 2008 financial crisis, Truist Financial (NYSE:TFC) is a bank holding company that offers a wide range of financial services including consumer and commercial banking, wealth management, insurance, and lending solutions.
Why Do We Think TFC Will Underperform?
- Large revenue base makes it harder to expand quickly, and its annual net interest income growth of 2.5% over the last five years was below our standards for the banking sector
- Earnings per share were flat over the last five years and fell short of the peer group average
- Underwhelming 4.8% return on equity reflects management’s difficulties in finding profitable growth opportunities
At $49.49 per share, Truist Financial trades at 1x forward P/B. Check out our free in-depth research report to learn more about why TFC doesn’t pass our bar.
Wells Fargo (WFC)
Market Cap: $298.8 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 Is WFC Risky?
- Sizable revenue base leads to growth challenges as its 2.4% annual net interest income increases over the last five years fell short of other banking companies
- Net interest margin dropped by 45.3 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
- Estimated tangible book value per share growth of 4.6% for the next 12 months implies profitability will slow from its two-year trend
Wells Fargo is trading at $94.91 per share, or 1.8x forward P/B. Read our free research report to see why you should think twice about including WFC in your portfolio.
Stocks We Like More
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% 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.