Banks serve as the backbone of the economy, facilitating lending, deposits, and financial services that keep businesses and consumers moving forward. These institutions have benefited from improved net interest margins and robust credit growth, so it’s no surprise the banking industry has posted a 12% gain over the past six months, nearly mirroring the S&P 500.
Nevertheless, investors should tread carefully as many banks are cyclical due to their exposure to credit risk and regulatory changes. Taking that into account, here are three bank stocks that may face trouble.
National Bank Holdings (NBHC)
Market Cap: $1.84 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 Does NBHC Worry Us?
- Annual revenue growth of 6.1% over the last two years was below our standards for the banking sector
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 2.5% annually
- Annual tangible book value per share growth of 1.8% over the last five years was below our standards for the banking sector
National Bank Holdings’s stock price of $41.33 implies a valuation ratio of 1.1x forward P/B. Read our free research report to see why you should think twice about including NBHC in your portfolio.
BOK Financial (BOKF)
Market Cap: $8.17 billion
Tracing its roots back to 1910 when Oklahoma was still a young state, BOK Financial (NASDAQ:BOKF) is a regional bank holding company that provides commercial banking, consumer banking, and wealth management services across eight states in the central and southwestern US.
Why Are We Hesitant About BOKF?
- Sales trends were unexciting over the last five years as its 3.4% annual growth was below the typical banking company
- Muted 4% annual net interest income growth over the last five years shows its demand lagged behind its banking peers
- Earnings growth underperformed the sector average over the last five years as its EPS grew by just 2.8% annually
BOK Financial is trading at $134.44 per share, or 1.3x forward P/B. If you’re considering BOKF for your portfolio, see our FREE research report to learn more.
BankUnited (BKU)
Market Cap: $3.22 billion
Born from the ashes of a failed Florida thrift during the 2009 financial crisis, BankUnited (NYSE:BKU) is a regional bank that provides commercial lending, deposit services, and treasury solutions to businesses and consumers primarily in Florida and the New York metropolitan area.
Why Do We Avoid BKU?
- Annual net interest income growth of 5.5% over the last five years was below our standards for the banking sector
- Inferior net interest margin of 2.9% means it must compensate for lower profitability through increased loan originations
- Earnings per share were flat over the last five years while its revenue grew, showing its incremental sales were less profitable
At $45.21 per share, BankUnited trades at 1.1x forward P/B. Check out our free in-depth research report to learn more about why BKU doesn’t pass our bar.
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