Banks serve as the backbone of the economy, facilitating lending, deposits, and financial services that keep businesses and consumers moving forward. Market leaders have certainly capitalized on rising interest rates and strong loan demand to boost profitability, helping fuel a 8.6% gain for the banking industry over the past six months. This performance has closely followed the S&P 500.
Although banks have produced good results, only a handful will thrive over the long term as fintech disruptors are rapidly taking market share from traditional institutions. Keeping that in mind, here is one bank stock poised to generate sustainable market-beating returns and two that may face trouble.
Two Bank Stocks to Sell:
United Bankshares (UBSI)
Market Cap: $6.35 billion
With roots dating back to 1982 and a strong presence in the Mid-Atlantic region, United Bankshares (NASDAQ: UBSI) is a bank holding company that provides commercial and retail banking services through its United Bank subsidiary across multiple states.
Why Are We Hesitant About UBSI?
- Net interest income trends were unexciting over the last five years as its 8.8% annual growth was below the typical banking firm
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 2.5% annually
- Estimated tangible book value per share growth of 5.9% for the next 12 months implies profitability will slow from its two-year trend
United Bankshares is trading at $46.18 per share, or 1.1x forward P/B. To fully understand why you should be careful with UBSI, check out our full research report (it’s free).
National Bank Holdings (NBHC)
Market Cap: $2.02 billion
Operating under familiar local brands like Community Banks of Colorado, Bank Midwest, and Bank of Jackson Hole, National Bank Holdings (NYSE: NBHC) operates regional banks across Colorado, Kansas, Missouri, Wyoming, Texas, and other western states, offering commercial, business, and consumer banking services.
Why Is NBHC Not Exciting?
- Sales trends were unexciting over the last two years as its 2.5% annual growth was below the typical banking company
- Earnings per share were flat over the last five years while its revenue grew, showing its incremental sales were less profitable
- Annual tangible book value per share growth of 2.1% over the last five years was below our standards for the banking sector
National Bank Holdings’s stock price of $45.02 implies a valuation ratio of 1.1x forward P/B. Check out our free in-depth research report to learn more about why NBHC doesn’t pass our bar.
One Bank Stock to Watch:
Pinnacle Financial Partners (PNFP)
Market Cap: $15.13 billion
Founded in 2000 with a focus on delivering big-bank capabilities with community bank personalization, Pinnacle Financial Partners (NASDAQ: PNFP) is a Tennessee-based financial holding company that provides banking, investment, trust, mortgage, and insurance services to businesses and individuals.
Why Are We Positive on PNFP?
- Unique value proposition resonates with borrowers, as seen in its above-market 13.5% annual net interest income growth over the last five years
- Projected net interest income growth of 89.4% for the next 12 months is above its five-year trend, pointing to accelerating demand
- Annual tangible book value per share growth of 10% over the past five years was outstanding, reflecting strong capital accumulation this cycle
At $100.54 per share, Pinnacle Financial Partners trades at 1x forward P/B. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
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