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3 Overrated Bank Stocks Walking a Fine Line

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UBSI Cover Image

The stocks featured in this article have all approached their 52-week highs. When these price levels hit, it typically signals strong business execution, positive market sentiment, or significant industry tailwinds.

But not every company with momentum is a long-term winner, and plenty of investors have lost money betting on short-term fads. Keeping that in mind, here are three stocks getting more buzz than they deserve and some you should buy instead.

United Bankshares (UBSI)

One-Month Return: +1.1%

With roots dating back to 1982 and a strong presence in the Mid-Atlantic region, United Bankshares (NASDAQ: UBSI) is a bank holding company that provides commercial and retail banking services through its United Bank subsidiary across multiple states.

Why Are We Cautious About UBSI?

  1. 8.8% annual net interest income growth over the last five years was slower than its banking peers
  2. Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 2.5% annually
  3. Estimated tangible book value per share growth of 6.3% for the next 12 months implies profitability will slow from its two-year trend

At $43.91 per share, United Bankshares trades at 1.1x forward P/B. Check out our free in-depth research report to learn more about why UBSI doesn’t pass our bar.

Texas Capital Bank (TCBI)

One-Month Return: +1.8%

Founded during the Texas banking renaissance of the 1990s with an entrepreneurial spirit, Texas Capital Bancshares (NASDAQ: TCBI) is a financial services firm that provides banking, wealth management, and investment banking services to businesses and individuals across Texas and beyond.

Why Does TCBI Worry Us?

  1. Annual net interest income growth of 5.1% over the last five years was below our standards for the banking sector
  2. Estimated net interest income growth of 3% for the next 12 months implies demand will slow from its five-year trend
  3. Low return on equity reflects management’s struggle to allocate funds effectively

Texas Capital Bank’s stock price of $101.77 implies a valuation ratio of 1.3x forward P/B. Read our free research report to see why you should think twice about including TCBI in your portfolio.

Fulton Financial (FULT)

One-Month Return: +2.1%

Tracing its roots back to 1882 in the heart of Pennsylvania, Fulton Financial (NASDAQ: FULT) is a financial holding company that provides banking, lending, and wealth management services to consumers and businesses across five Mid-Atlantic states.

Why Does FULT Give Us Pause?

  1. Muted 8.9% annual revenue growth over the last five years shows its demand lagged behind its banking peers
  2. Performance over the past five years shows its incremental sales were less profitable, as its 6.6% annual earnings per share growth trailed its revenue gains
  3. Capital generation will likely be soft over the next 12 months as Wall Street’s estimates imply tepid tangible book value per share growth of 9.8%

Fulton Financial is trading at $21.96 per share, or 1.1x forward P/B. If you’re considering FULT for your portfolio, see our FREE research report to learn more.

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