Banks use their capital and expertise to help businesses grow while offering consumers essential financial products like mortgages and credit cards. 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 8.9% gain has fallen behind the S&P 500’s 23.8% rise.
Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. With that said, here is one bank stock poised to generate sustainable market-beating returns and two we’re swiping left on.
Two Bank Stocks to Sell:
Butterfield Bank (NTB)
Market Cap: $1.80 billion
Founded in 1784 as one of the oldest banks in the Western Hemisphere, Butterfield Bank (NYSE: NTB) provides banking, wealth management, and trust services to individuals and businesses in select offshore financial centers including Bermuda, Cayman Islands, and the Channel Islands.
Why Does NTB Worry Us?
- Net interest income trends were unexciting over the last five years as its 2.3% annual growth was below the typical banking firm
- Estimated net interest income decline of 44% for the next 12 months implies a challenging demand environment
- Net interest margin of 2.7% is well below other banks, signaling its loans aren’t very profitable
Butterfield Bank is trading at $44.34 per share, or 1.6x forward P/B. Dive into our free research report to see why there are better opportunities than NTB.
Banc of California (BANC)
Market Cap: $2.63 billion
Originally established in 1941 and now operating with a tech-forward approach that includes its SmartStreet platform for homeowner associations, Banc of California (NYSE: BANC) is a California-based bank holding company that provides banking services to small and middle-market businesses, entrepreneurs, and individuals.
Why Are We Cautious About BANC?
- Net interest income was flat over the last five years, indicating it’s failed to expand this cycle
- Operational productivity has decreased over the last five years as its efficiency ratio worsened by 20.5 percentage points
- Products and services are facing significant credit quality challenges during this cycle as tangible book value per share has declined by 3.6% annually over the last five years
Banc of California’s stock price of $17.21 implies a valuation ratio of 0.9x forward P/B. To fully understand why you should be careful with BANC, check out our full research report (it’s free for active Edge members).
One Bank Stock to Buy:
German American Bancorp (GABC)
Market Cap: $1.46 billion
Founded in 1910 during a wave of community banking expansion in the Midwest, German American Bancorp (NASDAQ: GABC) is a financial holding company that provides banking, wealth management, and insurance services across southern Indiana and Kentucky.
Why Should You Buy GABC?
- Market share has increased this cycle as its 13.8% annual net interest income growth over the last five years was exceptional
- Net interest margin grew by 35 basis points (100 basis points = 1 percentage point) over the last two years, giving the firm more chips to play with
- Balance sheet strength has increased this cycle as its 26.1% annual tangible book value per share growth over the last two years was exceptional
At $38.85 per share, German American Bancorp trades at 1.3x forward P/B. Is now a good time to buy? See for yourself in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 5 Strong Momentum Stocks for this week. 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
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