Banks use their capital and expertise to help businesses grow while offering consumers essential financial products like mortgages and credit cards. These institutions have benefited from improved net interest margins, and healthy credit conditions have supported the industry’s returns lately - over the past six months, banking stocks stood firm with a flat return while the S&P 500 was down 1%.

Although this could signal cash-like stability, investors must be mindful because fintech disruptors are rapidly taking market share from traditional banks. Keeping that in mind, here are three bank stocks we’re swiping left on.

OceanFirst Financial (OCFC)

Market Cap: $1.01 billion

Tracing its roots back to 1902 when it began serving coastal New Jersey communities, OceanFirst Financial (NASDAQ: OCFC) operates as a regional bank holding company that provides commercial and consumer banking services primarily in New Jersey and surrounding metropolitan areas.

Why Do We Think OCFC Will Underperform?

1. 2.5% annual net interest income growth over the last five years was slower than its banking peers
2. Sales over the last two years were less profitable as its earnings per share fell by 10.4% annually while its revenue was flat
3. Estimated tangible book value per share decline of 2.4% for the next 12 months implies a challenging profitability environment

OceanFirst Financial is trading at $17.75 per share, or 0.7x forward P/B. If you’re considering OCFC for your portfolio, see our FREE research report to learn more.

FirstSun Capital Bancorp (FSUN)

Market Cap: $1.02 billion

Tracing its roots back to 1892 when it first opened its doors in Kansas, FirstSun Capital Bancorp (NASDAQ: FSUN) operates Sunflower Bank, providing commercial and consumer banking services to businesses and individuals across the Southwest region.

Why Does FSUN Fall Short?

1. Annual revenue growth of 5.5% over the last two years was below our standards for the banking sector
2. Concessions to defend its market share have ramped up over the last two years as its net interest margin decreased by 22 basis points (100 basis points = 1 percentage point)
3. Forecasted tangible book value per share decline of 3.3% for the upcoming 12 months implies profitability will deteriorate significantly

FirstSun Capital Bancorp’s stock price of $36.42 implies a valuation ratio of 0.9x forward P/B. Check out our free in-depth research report to learn more about why FSUN doesn’t pass our bar.

Frost Bank (CFR)

Market Cap: $8.62 billion

Tracing its roots back to 1868 when it was founded during Texas's post-Civil War reconstruction era, Cullen/Frost Bankers (NYSE: CFR) operates Frost Bank, a Texas-based financial institution providing commercial and consumer banking, wealth management, and insurance services.

Why Are We Hesitant About CFR?

1. 6.1% annual revenue growth over the last two years was slower than its banking peers
2. Performance over the past two years shows its incremental sales were less profitable, as its 2.2% annual earnings per share growth trailed its revenue gains
3. Tangible book value per share is projected to decrease by 4.9% over the next 12 months as capital generation weakens

At $136.36 per share, Frost Bank trades at 1.8x forward P/B. Dive into our free research report to see why there are better opportunities than CFR.

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