2 Bank Stocks with Promising Prospects and 1 Facing Challenges

Banks play a critical role in the financial system, providing everything from commercial loans to wealth management and payment processing services. These institutions have benefited from improved net interest margins and robust credit growth, so it’s no surprise the banking industry has posted a 13.8% gain over the past six months, beating the S&P 500 by 6.6 percentage points.

Regardless of these results, investors must exercise caution as many banks are sensitive to interest rate fluctuations and economic cycles. On that note, here are two bank stocks boasting durable advantages and one that may face trouble.

One Bank Stock to Sell:

Camden National Bank (CAC)

Market Cap: $825.9 million

Rooted in Maine's coastal communities since 1875, Camden National (NASDAQ:CAC) is a regional bank holding company that provides banking, wealth management, and financial services to consumers and businesses throughout Maine and New Hampshire.

Why Does CAC Fall Short?

1. Annual net interest income growth of 8.6% over the last five years was below our standards for the banking sector
2. Incremental sales over the last five years were less profitable as its 1.2% annual earnings per share growth lagged its revenue gains
3. Tangible book value per share was flat over the last five years, indicating it’s failed to build equity value this cycle

Camden National Bank’s stock price of $48.80 implies a valuation ratio of 1.1x forward P/B. If you’re considering CAC for your portfolio, see our FREE research report to learn more.

Two Bank Stocks to Watch:

Stock Yards Bank (SYBT)

Market Cap: $2.13 billion

Founded in 1904 in Louisville and named after the city's historic livestock market district, Stock Yards Bancorp (NASDAQ:SYBT) operates a regional bank providing commercial banking, wealth management, and trust services across Kentucky, Indiana, and Ohio.

Why Do We Like SYBT?

1. Impressive 16.9% annual net interest income growth over the last five years indicates it’s winning market share this cycle
2. Market share will likely rise over the next 12 months as its expected net interest income growth of 16.3% is robust
3. Net interest margin grew by 26 basis points (100 basis points = 1 percentage point) over the last two years, giving the firm more chips to play with

Stock Yards Bank is trading at $72.16 per share, or 1.7x forward P/B. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.

Coastal Financial (CCB)

Market Cap: $1.14 billion

Pioneering the intersection of traditional banking and financial technology in the Pacific Northwest, Coastal Financial (NASDAQ:CCB) operates as a bank holding company that provides traditional banking services and Banking-as-a-Service (BaaS) solutions to consumers and businesses.

Why Will CCB Outperform?

1. Annual net interest income growth of 38% over the past five years was outstanding, reflecting market share gains this cycle
2. Differentiated product suite leads to a Strong performance of its loan book leads to a High-yielding loan book and low cost of funds lead to a best-in-class net interest margin of 7.2%
3. Annual tangible book value per share growth of 20.3% over the past two years was outstanding, reflecting strong capital accumulation this cycle

At $74.68 per share, Coastal Financial trades at 2x 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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