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 7.7% gain over the past six months, nearly mirroring the S&P 500.
Regardless of these results, investors must exercise caution as many banks are sensitive to interest rate fluctuations and economic cycles. Keeping that in mind, here are three bank stocks best left ignored.
Origin Bancorp (OBK)
Market Cap: $1.53 billion
Founded in 1912 during the early boom days of Louisiana banking, Origin Bancorp (NYSE: OBK) is a financial holding company that provides personalized banking services to businesses, municipalities, and individuals across Texas, Louisiana, and Mississippi.
Why Are We Wary of OBK?
- 8.2% annual revenue growth over the last five years was slower than its banking peers
- Incremental sales over the last five years were less profitable as its 6.8% annual earnings per share growth lagged its revenue gains
- Estimated tangible book value per share growth of 8.1% for the next 12 months implies profitability will slow from its two-year trend
Origin Bancorp’s stock price of $50.20 implies a valuation ratio of 1.2x forward P/B. Read our free research report to see why you should think twice about including OBK in your portfolio.
Independent Bank (INDB)
Market Cap: $3.95 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 Is INDB Not Exciting?
- 3.9% annual tangible book value per share growth over the last two years was slower than its banking peers
- Anticipated tangible book value per share growth of 9% for the next year implies profitability will be modest
- Low return on equity reflects management’s struggle to allocate funds effectively
At $83.24 per share, Independent Bank trades at 1.1x forward P/B. If you’re considering INDB for your portfolio, see our FREE research report to learn more.
First Hawaiian Bank (FHB)
Market Cap: $3.42 billion
Dating back to 1858 as Hawaii's oldest bank with deep roots in the Pacific island communities, First Hawaiian (NASDAQ: FHB) operates a full-service community bank providing deposit accounts, commercial and consumer loans, credit cards, and wealth management services across Hawaii, Guam, and Saipan.
Why Are We Out on FHB?
- Net interest income trends were unexciting over the last five years as its 5% annual growth was below the typical banking firm
- Net interest margin of 3.1% reflects its high servicing and capital costs
- Muted 2.3% annual tangible book value per share growth over the last five years shows its capital generation lagged behind its banking peers
First Hawaiian Bank is trading at $28.69 per share, or 1.2x forward P/B. To fully understand why you should be careful with FHB, check out our full research report (it’s free).
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