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 14.3% over the past six months, almost identical to the S&P 500.

Although banks have produced good results, only a handful will thrive over the long term as fintech disruptors are rapidly taking market share from traditional institutions. With that said, here are three bank stocks we’re steering clear of.

Triumph Financial (TFIN)

Market Cap: $1.55 billion

Originally focused on traditional banking before pivoting to serve the transportation sector, Triumph Financial (NASDAQ: TFIN) provides specialized financial services to the trucking industry, including payments processing, factoring, banking, and data intelligence solutions.

Why Is TFIN Risky?

1. Net interest income trends were unexciting over the last five years as its 5.4% annual growth was below the typical banking firm
2. 130.7 basis point (100 basis points = 1 percentage point) decline in its net interest margin over the last two years reflects the firm’s willingness to accept lower profitability to defend its market position
3. Earnings per share fell by 22.1% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable

Triumph Financial is trading at $64.95 per share, or 1.7x forward P/B. Check out our free in-depth research report to learn more about why TFIN doesn’t pass our bar.

First Financial Bancorp (FFBC)

Market Cap: $2.57 billion

Tracing its roots back to 1863 during the Civil War era, First Financial Bancorp (NASDAQ: FFBC) is a bank holding company that provides commercial banking, lending, deposit services, and wealth management to individuals and businesses.

Why Do We Think Twice About FFBC?

1. 2.5% annual revenue growth over the last two years was slower than its banking peers
2. Muted 6.4% annual net interest income growth over the last five years shows its demand lagged behind its banking peers
3. Earnings per share were flat over the last two years while its revenue grew, showing its incremental sales were less profitable

At $26.11 per share, First Financial Bancorp trades at 1x forward P/B. If you’re considering FFBC for your portfolio, see our FREE research report to learn more.

Commerce Bancshares (CBSH)

Market Cap: $7.37 billion

Founded in 1865 during the post-Civil War economic boom, Commerce Bancshares (NASDAQGS:CBSH) is a Midwest-focused bank holding company that provides retail, commercial, and wealth management services to individuals and businesses.

Why Does CBSH Worry Us?

1. Annual revenue growth of 5.2% over the last two years was below our standards for the banking sector
2. 5.9% annual net interest income growth over the last five years was slower than its banking peers
3. Estimated tangible book value per share growth of 5.2% for the next 12 months implies profitability will slow from its two-year trend

Commerce Bancshares’s stock price of $53.02 implies a valuation ratio of 1.9x forward P/B. Read our free research report to see why you should think twice about including CBSH in your portfolio.

High-Quality Stocks for All Market Conditions

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