1 Bank Stock Worth Investigating and 2 We Ignore

Banks play a critical role in the financial system, providing everything from commercial loans to wealth management and payment processing services. But concerns about loan losses and tightening regulations have tempered enthusiasm, and over the past six months, the banking industry has pulled back by 1.2%. This drawdown was disappointing since the S&P 500 climbed 4.8%.

Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. With that said, here is one resilient bank stock at the top of our wish list and two best left ignored.

Two Bank Stocks to Sell:

KeyCorp (KEY)

Market Cap: $21.64 billion

Tracing its roots back to 1849 during the California Gold Rush era, KeyCorp (NYSE:KEY) operates KeyBank, a full-service regional bank providing retail and commercial banking, wealth management, and investment services across 15 states.

Why Is KEY Not Exciting?

1. 2.9% annual net interest income growth over the last five years was slower than its banking peers
2. Net interest margin of 2.4% is well below other banks, signaling its loans aren’t very profitable
3. Flat tangible book value per share over the last five years suggest it must find different ways to enhance shareholder value during this cycle

KeyCorp is trading at $19.78 per share, or 1.2x forward P/B. To fully understand why you should be careful with KEY, check out our full research report (it’s free).

Cathay General Bancorp (CATY)

Market Cap: $3.25 billion

Founded in 1962 with its first branch in Los Angeles' Chinatown, Cathay General Bancorp (NASDAQ:CATY) operates Cathay Bank, providing commercial banking services to businesses and individuals with a strong presence in Asian-American communities.

Why Does CATY Worry Us?

1. Sales stagnated over the last two years and signal the need for new growth strategies
2. Net interest income trends were unexciting over the last five years as its 6.1% annual growth was below the typical banking firm
3. Performance over the past two years shows each sale was less profitable, as its earnings per share fell by 4.8% annually

Cathay General Bancorp’s stock price of $48.49 implies a valuation ratio of 1x forward P/B. If you’re considering CATY for your portfolio, see our FREE research report to learn more.

One Bank Stock to Watch:

The Bancorp (TBBK)

Market Cap: $2.22 billion

Operating behind the scenes of many popular fintech apps and prepaid cards you might use daily, The Bancorp (NASDAQ:TBBK) is a bank holding company that specializes in providing banking services to fintech companies and offering specialty lending products.

Why Are We Fans of TBBK?

1. Market share has increased this cycle as its 14% annual net interest income growth over the last five years was exceptional
2. Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
3. Annual tangible book value per share growth of 10.2% over the last five years was superb and indicates its capital strength increased during this cycle

At $52.66 per share, The Bancorp trades at 3x forward P/B. Is now a good time to buy? Find out in our full research report, it’s free.

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