Banks play a critical role in the financial system, providing everything from commercial loans to wealth management and payment processing services. Still, investors are uneasy as banks face challenges from credit quality concerns and potential regulatory changes. These doubts have certainly contributed to banking stocks’ recent underperformance - over the past six months, the industry’s 8.1% gain has fallen behind the S&P 500’s 16.9% rise.
Investors should tread carefully as many of these banks are also cyclical, and any misstep can have you catching a falling knife. Keeping that in mind, here are three bank stocks we’re steering clear of.
S&T Bancorp (STBA)
Market Cap: $1.75 billion
Tracing its roots back to 1902 in western Pennsylvania's industrial heartland, S&T Bancorp (NASDAQ:STBA) is a Pennsylvania-based bank holding company that provides retail and commercial banking services, cash management, trust services, and investment advisory solutions.
Why Do We Think STBA Will Underperform?
- 5.2% annual net interest income growth over the last five years was slower than its banking peers
- Estimated net interest income growth of 4.1% for the next 12 months is soft and implies weaker demand
- Earnings growth underperformed the sector average over the last two years as its EPS grew by just 3.2% annually
S&T Bancorp’s stock price of $49.60 implies a valuation ratio of 1.2x forward P/B. Read our free research report to see why you should think twice about including STBA in your portfolio.
First Hawaiian Bank (FHB)
Market Cap: $3.06 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 Bearish on FHB?
- Annual net interest income growth of 5.1% over the last five years was below our standards for the banking sector
- Incremental sales over the last five years were less profitable as its 1.6% annual earnings per share growth lagged its revenue gains
- Estimated tangible book value per share growth of 2.9% for the next 12 months implies profitability will slow from its two-year trend
First Hawaiian Bank is trading at $25.12 per share, or 1x forward P/B. If you’re considering FHB for your portfolio, see our FREE research report to learn more.
BancFirst (BANF)
Market Cap: $3.61 billion
Operating as a "super community bank" with a decentralized management approach that emphasizes local responsiveness, BancFirst Corporation (NASDAQ:BANF) operates as a financial holding company providing commercial banking services to retail customers and small to medium-sized businesses primarily in Oklahoma and Texas.
Why Does BANF Worry Us?
- Muted 8.9% annual revenue growth over the last five years shows its demand lagged behind its banking peers
- Projected 1.4 percentage point efficiency ratio increase over the next year signals its day-to-day expenses will rise
- Estimated tangible book value per share growth of 9.6% for the next 12 months implies profitability will slow from its two-year trend
At $107.33 per share, BancFirst trades at 1.7x forward P/B. Dive into our free research report to see why there are better opportunities than BANF.
High-Quality Stocks for All Market Conditions
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.