Banks serve as the backbone of the economy, facilitating lending, deposits, and financial services that keep businesses and consumers moving forward. 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 4.2% gain has fallen behind the S&P 500’s 6.5% rise.
While some banks have strong balance sheets and diversified revenue streams that enable them to thrive in any environment, the odds aren’t great for the ones we’re analyzing today. Keeping that in mind, here are three bank stocks we’re swiping left on.
WSFS Financial (WSFS)
Market Cap: $3.61 billion
Founded in 1832 as Wilmington Savings Fund Society and one of the oldest banks in America still operating under its original name, WSFS Financial (NASDAQ: WSFS) operates a community banking and wealth management franchise primarily serving customers in the Mid-Atlantic region through its main subsidiary, WSFS Bank.
Why Do We Think Twice About WSFS?
- 3.2% annual revenue growth over the last two years was slower than its banking peers
- Net interest income is projected to tank by 7.2% over the next 12 months as demand evaporates
- Concessions to defend its market share have ramped up over the last two years as its net interest margin decreased by 26.9 basis points (100 basis points = 1 percentage point)
WSFS Financial’s stock price of $65.98 implies a valuation ratio of 1.2x forward P/B. Dive into our free research report to see why there are better opportunities than WSFS.
Stellar Bancorp (STEL)
Market Cap: $1.94 billion
Created through strategic mergers to serve the growing Texas business community, Stellar Bancorp (NYSE: STEL) is a Texas bank holding company that provides commercial banking services primarily to small and medium-sized businesses and professionals.
Why Do We Think STEL Will Underperform?
- Sales tumbled by 4.2% annually over the last two years, showing market trends are working against its favor during this cycle
- Net interest margin dropped by 35.6 basis points (100 basis points = 1 percentage point) over the last two years, implying the firm’s loan book profitability fell as competitors entered the market
- Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
At $38.21 per share, Stellar Bancorp trades at 1.1x forward P/B. If you’re considering STEL for your portfolio, see our FREE research report to learn more.
Banc of California (BANC)
Market Cap: $3.05 billion
Originally established in 1941 and now operating with a tech-forward approach that includes its SmartStreet platform for homeowner associations, Banc of California (NYSE: BANC) is a California-based bank holding company that provides banking services to small and middle-market businesses, entrepreneurs, and individuals.
Why Do We Steer Clear of BANC?
- 2.4% annual net interest income growth over the last five years was slower than its banking peers
- Day-to-day expenses have swelled relative to revenue over the last five years as its efficiency ratio increased by 19.5 percentage points
- Loan losses and capital returns have eroded its tangible book value per share this cycle as its tangible book value per share declined by 3.9% annually over the last five years
Banc of California is trading at $19.62 per share, or 0.9x forward P/B. Read our free research report to see why you should think twice about including BANC in your portfolio.
Stocks We Like More
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
