Banks play a critical role in the financial system, providing everything from commercial loans to wealth management and payment processing services. Still, investors are uneasy as banks face challenges from credit quality concerns and potential regulatory changes. These doubts have certainly contributed to banking stocks’ recent underperformance - over the past six months, the industry’s 10.3% gain has fallen behind the S&P 500’s 18.6% rise.
The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. Keeping that in mind, here is one resilient bank stock at the top of our wish list and two we’re passing on.
Two Bank Stocks to Sell:
TriCo Bancshares (TCBK)
Market Cap: $1.45 billion
Founded in 1975 and headquartered in Chico, California, TriCo Bancshares (NASDAQ: TCBK) operates Tri Counties Bank, providing personal, small business, and commercial banking services through branches across California.
Why Are We Wary of TCBK?
- Net interest income trends were unexciting over the last five years as its 5.7% annual growth was below the typical banking firm
- Net interest margin dropped by 28.7 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
- Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
TriCo Bancshares’s stock price of $44.56 implies a valuation ratio of 1.1x forward P/B. Read our free research report to see why you should think twice about including TCBK in your portfolio.
Brookline Bancorp (BRKL)
Market Cap: $975.7 million
Founded in 1871 and operating through three subsidiary banks across three states, Brookline Bancorp (NASDAQ: BRKL) is a multi-bank holding company that provides commercial, business, and retail banking services to small and mid-sized businesses and individuals in New England and New York.
Why Does BRKL Worry Us?
- 6.7% annual net interest income growth over the last five years was slower than its banking peers
- Net interest margin dropped by 27 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
- Incremental sales over the last two years were much less profitable as its earnings per share fell by 10.9% annually while its revenue grew
At $11.05 per share, Brookline Bancorp trades at 2.9x trailing 12-month price-to-sales. Dive into our free research report to see why there are better opportunities than BRKL.
One Bank Stock to Watch:
Ameris Bancorp (ABCB)
Market Cap: $5.08 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 Are We Positive On ABCB?
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 15% over the last two years outstripped its revenue performance
- Annual tangible book value per share growth of 14.6% over the last five years was superb and indicates its capital strength increased during this cycle
- Market-beating return on equity illustrates that management has a knack for investing in profitable ventures
Ameris Bancorp is trading at $74.34 per share, or 1.3x forward P/B. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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