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 has tumbled by 1%. This drop was almost identical to the S&P 500’s decline.
Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. 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:
Valley National Bank (VLY)
Market Cap: $6.68 billion
Tracing its roots back to 1927 during the economic boom before the Great Depression, Valley National Bancorp (NASDAQGS:VLY) operates Valley National Bank, providing commercial, consumer, and wealth management banking services across several states.
Why Should You Dump VLY?
- Muted 3.7% annual revenue growth over the last two years shows its demand lagged behind its banking peers
- Estimated net interest income decline of 7.1% for the next 12 months implies a challenging demand environment
- Earnings per share were flat over the last five years while its revenue grew, showing its incremental sales were less profitable
Valley National Bank is trading at $12.00 per share, or 0.8x forward P/B. If you’re considering VLY for your portfolio, see our FREE research report to learn more.
Trustmark (TRMK)
Market Cap: $2.46 billion
Tracing its roots back to 1889 in Mississippi, Trustmark (NASDAQ: TRMK) is a financial services organization providing banking, wealth management, insurance, and mortgage services across five southeastern states.
Why Are We Wary of TRMK?
- Annual net interest income growth of 8.7% over the last five years was below our standards for the banking sector
- Estimated net interest income growth of 4.7% for the next 12 months implies demand will slow from its five-year trend
- Below-average return on equity indicates management struggled to find compelling investment opportunities
At $41.82 per share, Trustmark trades at 1.1x forward P/B. Check out our free in-depth research report to learn more about why TRMK doesn’t pass our bar.
One Bank Stock to Watch:
Amalgamated Financial (AMAL)
Market Cap: $1.14 billion
Founded in 1923 by labor unions seeking a financial institution aligned with worker values, Amalgamated Financial (NASDAQGM:AMAL) operates a values-oriented bank that provides commercial banking, trust services, and investment management to socially responsible organizations and individuals.
Why Does AMAL Stand Out?
- Net interest margin grew by 18.7 basis points (100 basis points = 1 percentage point) over the last two years, giving the firm more chips to play with
- Share buybacks catapulted its annual earnings per share growth to 17.9%, which outperformed its revenue gains over the last five years
- Impressive 9.5% annual tangible book value per share growth over the last five years indicates it’s building equity value this cycle
Amalgamated Financial’s stock price of $38.15 implies a valuation ratio of 1.2x forward P/B. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
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