3 Bank Stocks We Keep Off Our Radar

Banks use their capital and expertise to help businesses grow while offering consumers essential financial products like mortgages and credit cards. But concerns about loan losses and tightening regulations have tempered enthusiasm, and over the past six months, the banking industry has pulled back by 3.3%. This drop was discouraging since the S&P 500 returned 5.4%.

While some banks have strong balance sheets and diversified revenue streams that enable them to thrive in any environment, the odds aren’t great for the ones we’re analyzing today. On that note, here are three bank stocks that may face trouble.

F.N.B. Corporation (FNB)

Market Cap: $5.57 billion

Tracing its roots back to 1864 during the Civil War era, F.N.B. Corporation (NYSE:FNB) is a diversified financial services holding company that provides banking, wealth management, and insurance services to consumers and businesses across seven states and Washington, D.C.

Why Are We Hesitant About FNB?

1. Sales stagnated over the last two years and signal the need for new growth strategies
2. Net interest margin dropped by 27.3 basis points (100 basis points = 1 percentage point) over the last two years, implying the firm’s loan book profitability fell as competitors entered the market
3. Sales over the last two years were less profitable as its earnings per share fell by 7% annually while its revenue was flat

At $15.50 per share, F.N.B. Corporation trades at 0.8x forward P/B. To fully understand why you should be careful with FNB, check out our full research report (it’s free).

AGNC Investment (AGNC)

Market Cap: $9.85 billion

Born during the 2008 financial crisis when mortgage markets were in turmoil, AGNC Investment (NASDAQ:AGNC) is a real estate investment trust that primarily invests in mortgage-backed securities guaranteed by U.S. government agencies or enterprises.

Why Should You Sell AGNC?

1. Loans are facing significant end-market challenges during this cycle as net interest income has declined by 28.5% annually over the last five years
2. Earnings per share fell by 6.9% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
3. Annual tangible book value per share declines of 12.1% for the past five years show its capital management struggled during this cycle

AGNC Investment is trading at $9.48 per share, or 1.1x forward P/B. If you’re considering AGNC for your portfolio, see our FREE research report to learn more.

JPMorgan Chase (JPM)

Market Cap: $805.3 billion

Tracing its roots back to 1799 when its earliest predecessor was founded by Aaron Burr, JPMorgan Chase (NYSE:JPM) is a leading financial services company offering investment banking, consumer banking, commercial banking, and asset management services globally.

Why Is JPM Not Exciting?

1. Estimated net interest income growth of 2.4% for the next 12 months implies demand will slow from its five-year trend
2. Net interest margin of 2.6% is well below other banks, signaling its loans aren’t very profitable
3. Anticipated 2.6 percentage point rise in its efficiency ratio suggests its expenses will increase as a percentage of revenue

JPMorgan Chase’s stock price of $292.85 implies a valuation ratio of 2.3x forward P/B. Check out our free in-depth research report to learn more about why JPM doesn’t pass our bar.

Stocks We Like More

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