1 Bank Stock Worth Your Attention and 2 Facing Challenges

Banks serve as the backbone of the economy, facilitating lending, deposits, and financial services that keep businesses and consumers moving forward. 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 6.1 percentage points.

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. Keeping that in mind, here is one bank stock poised to generate sustainable market-beating returns and two that may face trouble.

Two Bank Stocks to Sell:

Independent Bank (INDB)

Market Cap: $4.15 billion

Tracing its roots back to 1907 and serving as a financial cornerstone in New England for over a century, Independent Bank Corp. (NASDAQ:INDB) operates as the holding company for Rockland Trust, providing banking, investment, and financial services across Eastern Massachusetts and Rhode Island.

Why Are We Cautious About INDB?

1. 8.2% annual revenue growth over the last two years was slower than its banking peers
2. Performance over the past two years shows its incremental sales were less profitable, as its 1.3% annual earnings per share growth trailed its revenue gains
3. Annual tangible book value per share growth of 3.8% over the last two years was below our standards for the banking sector

Independent Bank’s stock price of $84.10 implies a valuation ratio of 1.1x forward P/B. If you’re considering INDB for your portfolio, see our FREE research report to learn more.

Hope Bancorp (HOPE)

Market Cap: $1.56 billion

With roots in serving Korean-American communities and now expanded to a multi-ethnic clientele across 12 states, Hope Bancorp (NASDAQ:HOPE) operates Bank of Hope, providing commercial and retail banking services with a focus on serving multi-ethnic communities across the United States.

Why Do We Think HOPE Will Underperform?

1. Net interest income stagnated over the last five years and signal the need for new growth strategies
2. Flat earnings per share over the last five years underperformed the sector average
3. Flat tangible book value per share over the last two years suggest it must find different ways to enhance shareholder value during this cycle

At $12.16 per share, Hope Bancorp trades at 0.7x forward P/B. Dive into our free research report to see why there are better opportunities than HOPE.

One Bank Stock to Watch:

UMB Financial (UMBF)

Market Cap: $10.04 billion

With roots dating back to 1913 and a name derived from "United Missouri Bank," UMB Financial (NASDAQ:UMBF) is a financial holding company that provides banking, asset management, and fund services to commercial, institutional, and individual customers.

Why Are We Fans of UMBF?

1. Annual net interest income growth of 20.6% over the past five years was outstanding, reflecting market share gains this cycle
2. Net interest margin increased by 55.4 basis points (100 basis points = 1 percentage point) over the last two years, giving the firm more capital to invest or return to shareholders
3. Productivity and efficiency ratio profits are expected to increase next year as some fixed cost leverage kicks in

UMB Financial is trading at $132.15 per share, or 1.2x forward P/B. Is now the time to initiate a position? Find out in our full research report, it’s free.

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