1 Bank Stock to Research Further and 2 We Turn Down
Banks serve as the backbone of the economy, facilitating lending, deposits, and financial services that keep businesses and consumers moving forward. Furthermore, economic conditions have supported loan growth and fee income, a trend that has enabled the banking industry to return 10.6% over the past six months. At the same time, the S&P 500 was up 7.2%.
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. On that note, here is one bank stock boasting a durable advantage and two best left ignored.
Two Bank Stocks to Sell:
Arbor Realty Trust (ABR)
Market Cap: $992.6 million
With roots dating back to 2003 and a focus on the stability of multifamily housing, Arbor Realty Trust (NYSE:ABR) is a specialized lender that provides financing solutions for multifamily and commercial real estate while also originating and servicing government-backed mortgage loans.
Why Do We Steer Clear of ABR?
- Muted 4.3% annual net interest income growth over the last five years shows its demand lagged behind its banking peers
- Sales were less profitable over the last five years as its earnings per share fell by 15.3% annually, worse than its revenue declines
- Products and services are facing significant credit quality challenges during this cycle as tangible book value per share has declined by 5.6% annually over the last two years
At $4.97 per share, Arbor Realty Trust trades at 0.5x forward P/B. Dive into our free research report to see why there are better opportunities than ABR.
Camden National Bank (CAC)
Market Cap: $875.2 million
Rooted in Maine's coastal communities since 1875, Camden National (NASDAQ:CAC) is a regional bank holding company that provides banking, wealth management, and financial services to consumers and businesses throughout Maine and New Hampshire.
Why Is CAC Not Exciting?
- Net interest income trends were unexciting over the last five years as its 8.6% annual growth was below the typical banking firm
- Annual earnings per share growth of 1.2% underperformed its revenue over the last five years, showing its incremental sales were less profitable
- Products and services are facing profitability challenges during this cycle, as seen in its flat tangible book value per share over the last five years
Camden National Bank is trading at $53.68 per share, or 1.2x forward P/B. Read our free research report to see why you should think twice about including CAC in your portfolio.
One Bank Stock to Watch:
First BanCorp (FBP)
Market Cap: $3.84 billion
Tracing its roots back to 1948 in San Juan, First BanCorp (NYSE:FBP) is a bank holding company that provides commercial banking, consumer financing, mortgage services, and insurance products across Puerto Rico, the U.S. mainland, and the Caribbean.
Why Do We Like FBP?
- High-yielding loan book and low cost of funds lead to a best-in-class net interest margin of 4.6%
- Efficiency ratio improved by 11 percentage points over the last five years as it scaled
- Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
First BanCorp’s stock price of $26.55 implies a valuation ratio of 1.9x forward P/B. Is now a good time to buy? See for yourself in our full research report, it’s free.
Stocks We Like Even More
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