Banks play a critical role in the financial system, providing everything from commercial loans to wealth management and payment processing services. Furthermore, economic conditions have supported loan growth and fee income, a trend that has enabled the banking industry to return 10.5% over the past six months, almost identical to 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 we’re swiping left on.
S&T Bancorp (STBA)
Market Cap: $1.53 billion
Tracing its roots back to 1902 in western Pennsylvania's industrial heartland, S&T Bancorp (NASDAQ: STBA) is a Pennsylvania-based bank holding company that provides retail and commercial banking services, cash management, trust services, and investment advisory solutions.
Why Are We Cautious About STBA?
- Net interest income trends were unexciting over the last five years as its 3.9% annual growth was below the typical banking firm
- Projected net interest income growth of 5.1% for the next 12 months suggests sluggish demand
- Net interest margin shrank by 35.7 basis points (100 basis points = 1 percentage point) over the last two years, suggesting the profitability of its loan book is decreasing or the market is becoming more competitive
S&T Bancorp’s stock price of $39.95 implies a valuation ratio of 1x forward P/B. If you’re considering STBA for your portfolio, see our FREE research report to learn more.
Prosperity Bancshares (PB)
Market Cap: $6.54 billion
With a network of banking centers spanning the Lone Star State and beyond, Prosperity Bancshares (NYSE: PB) operates full-service banking locations throughout Texas and Oklahoma, offering a wide range of financial products and services to businesses and consumers.
Why Does PB Fall Short?
- Net interest income stagnated over the last five years and signal the need for new growth strategies
- Net interest margin of 3% is well below other banks, signaling its loans aren’t very profitable
- Earnings per share were flat over the last five years while its revenue grew, showing its incremental sales were less profitable
Prosperity Bancshares is trading at $68.80 per share, or 0.8x forward P/B. Dive into our free research report to see why there are better opportunities than PB.
Bank of America (BAC)
Market Cap: $374.9 billion
Tracing its roots back to 1784 and now serving approximately 67 million consumer and small business clients, Bank of America (NYSE: BAC) is a global financial institution that provides banking, investing, asset management, and risk management products and services to individuals, businesses, and governments.
Why Does BAC Worry Us?
- Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 2.1% for the last two years
- Annual net interest income growth of 4.8% over the last five years lagged behind its banking peers as its large revenue base made it difficult to generate incremental demand
- Weak unit economics are reflected in its net interest margin of 2%, one of the worst among bank companies
At $50.62 per share, Bank of America trades at 1.3x forward P/B. Check out our free in-depth research report to learn more about why BAC doesn’t pass our bar.
High-Quality Stocks for All Market Conditions
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
