Banks serve as the backbone of the economy, facilitating lending, deposits, and financial services that keep businesses and consumers moving forward. Furthermore, economic conditions have supported loan growth and fee income, a trend that has enabled the banking industry to return 16.9% over the past six months. At the same time, the S&P 500 was up 10.2%.
Nevertheless, investors should tread carefully as many banks are cyclical due to their exposure to credit risk and regulatory changes. With that said, here are two bank stocks boasting durable advantages and one best left ignored.
One Bank Stock to Sell:
BOK Financial (BOKF)
Market Cap: $8.00 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 Do We Pass on BOKF?
- Annual revenue growth of 2.2% over the last five years was below our standards for the banking sector
- Net interest income trends were unexciting over the last five years as its 3.7% annual growth was below the typical banking firm
- Net interest margin of 2.8% reflects its high servicing and capital costs
At $131.95 per share, BOK Financial trades at 1.2x forward P/B. Read our free research report to see why you should think twice about including BOKF in your portfolio.
Two Bank Stocks to Watch:
Popular (BPOP)
Market Cap: $9.30 billion
Founded in 1893 as the first bank in Puerto Rico to serve the working class, Popular (NASDAQ: BPOP) is a financial holding company that provides retail, mortgage, and commercial banking services primarily in Puerto Rico and the mainland United States.
Why Do We Love BPOP?
- Net interest margin jumped by 54.8 basis points (100 basis points = 1 percentage point) over the last two years, giving the firm more resources to pursue growth initiatives
- Share buybacks propelled its annual earnings per share growth to 22.1%, which outperformed its revenue gains over the last two years
- Balance sheet strength has increased this cycle as its 18.9% annual tangible book value per share growth over the last two years was exceptional
Popular is trading at $141.50 per share, or 1.3x forward P/B. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Old National Bank (ONB)
Market Cap: $9.90 billion
Tracing its roots back to 1834 when Andrew Jackson was president, Old National Bancorp (NASDAQ: ONB) is a bank holding company that provides commercial and consumer loans, deposit services, wealth management, and treasury solutions primarily throughout the Midwest region.
Why Are We Fans of ONB?
- Annual net interest income growth of 28.1% over the last five years was superb and indicates its market share increased during this cycle
- Expected net interest income growth of 17.7% for the next year suggests its market share will rise
- Productivity and efficiency ratio profits are expected to increase next year as some fixed cost leverage kicks in
Old National Bank’s stock price of $25.41 implies a valuation ratio of 1.1x forward P/B. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
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