1 Bank Stock to Target This Week and 2 We Question

Banks serve as the backbone of the economy, facilitating lending, deposits, and financial services that keep businesses and consumers moving forward. 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 5.7% gain has fallen behind the S&P 500’s 8.9% rise.

Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. On that note, here is one bank stock boasting a durable advantage and two we’re swiping left on.

Two Bank Stocks to Sell:

Valley National Bank (VLY)

Market Cap: $7.99 billion

Tracing its roots back to 1927 during the economic boom before the Great Depression, Valley National Bancorp (NASDAQGS:VLY) operates Valley National Bank, providing commercial, consumer, and wealth management banking services across several states.

Why Do We Steer Clear of VLY?

1. Muted 9.6% annual net interest income growth over the last five years shows its demand lagged behind its banking peers
2. Weak unit economics are reflected in its net interest margin of 3%, one of the worst among bank companies
3. Annual earnings per share growth of 1.5% underperformed its revenue over the last five years, showing its incremental sales were less profitable

At $13.91 per share, Valley National Bank trades at 1x forward P/B. Check out our free in-depth research report to learn more about why VLY doesn’t pass our bar.

First Interstate BancSystem (FIBK)

Market Cap: $3.55 billion

Tracing its roots back to 1971 and still guided by founding family principles, First Interstate BancSystem (NASDAQ:FIBK) operates a network of community banks across 14 western and midwestern states, offering comprehensive banking services to individuals, businesses, and government entities.

Why Is FIBK Risky?

1. Sales were flat over the last two years, indicating it’s failed to expand this cycle
2. Earnings per share were flat over the last five years while its revenue grew, showing its incremental sales were less profitable
3. Tangible book value per share is projected to remain flat over the next 12 months as profitability decelerates from its two-year trend

First Interstate BancSystem’s stock price of $36.46 implies a valuation ratio of 1x forward P/B. Dive into our free research report to see why there are better opportunities than FIBK.

One Bank Stock to Watch:

Amalgamated Financial (AMAL)

Market Cap: $1.32 billion

Founded in 1923 by labor unions seeking a financial institution aligned with worker values, Amalgamated Financial (NASDAQGM:AMAL) operates a values-oriented bank that provides commercial banking, trust services, and investment management to socially responsible organizations and individuals.

Why Does AMAL Stand Out?

1. Net interest margin increased by 27 basis points (100 basis points = 1 percentage point) over the last two years, giving the firm more capital to invest or return to shareholders
2. Share buybacks propelled its annual earnings per share growth to 15.7%, which outperformed its revenue gains over the last five years
3. Annual tangible book value per share growth of 9.7% over the last five years was superb and indicates its capital strength increased during this cycle

Amalgamated Financial is trading at $43.95 per share, or 1.4x forward P/B. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.

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