Stocks to sell

3 Regional Banking Stocks to Sell as Big Banks Grow

Over the last 50 years, the banking industry in the United States has undergone a significant number of changes that have left it more centralized than ever. It has also left them reliant on big banks in the Federal Reserve for most people’s active financial management. Where once most people went to their regional banking companies to obtain loans for houses or cars, now many are relying on a handful of big banks instead. 

Part of this is a result of the digitized nature of modern banking, since for most accounts, there’s no need to ever step into a physical banking location to open or manage the account. As a result, the geographical advantage that regional banks once had over large banks is gone, and many are struggling to keep up. Thus, it may be worth selling regional bank stocks over the next decade as digital banking and large corporations outcompete the sector.

Fifth Third Bancorp (FITB)

Source: Susan Montgomery / Shutterstock.com

With over 1,100 branches and an exceptionally wide range of services, from accounts and loans to wealth management, Fifth Third Bancorp (NASDAQ:FITB) operates like something more of a large national bank than a regional one. However, for one reason or another, the Cincinnati, Ohio-based giant has remained relatively confined to the Midwest and Southeast regions of the United States.

This has put FITB on a relatively stable yet stagnant revenue trajectory despite its stock performing very well over the last 12 months. From an analytical standpoint, the company is relatively healthy enough to invest in at the moment. Its price-to-earnings ratio of 17.68x is more than fair for major regional bank stocks and is currently very close to its 52-week high.

However, both revenue and net income have gradually declined for the company, which can clue investors in on a future dip to avoid. With the company’s most recent second-quarter earnings report marking a 2.44% decline in revenue and a 6.81% decrease in net income, its ability to remain liquid over the long run and maintain investment growth could be at risk.

New York Community Bancorp (NYCB)

Source: T. Schneider / Shutterstock.com

Back in April, I warned about New York Community Bancorp’s (NYSE:NYCB) potential weakness following its rebranding to Flagstar. Since then, the stock has remained relatively flat, but its financial performance has decreased at a concerning pace.

The bank is currently facing a revenue decrease of 8.92% year-over-year, worsening its net losses of $327 million, which represents a 116% decrease year-over-year. As a result, both earnings per share and net profit margin are in the negative at -1.35 and -74.49% respectively. For a regional bank, this kind of income instability can be a death sentence over the long run, and may very well result in NYCB’s being bought out by another, larger banking corporation.

Moreover, considering the general savings and investing struggles of the average person living in New York City and its metro area, NYCB is unlikely to raise capital from its region in the form of banking customers as many people leave the city due to increasing crime and cost of living.

Southern California Bancorp (BCAL)

Source: Syda Productions / Shutterstock.com

Another regional banking corporation feeling the effects of regional flight on its income trajectory, Southern California Bancorp (NASDAQ:BCAL) has performed quite poorly year-to-date. As of Q1 2024, the company’s revenue has sunk 15.32% year-over-year. This puts it at $22.24 million for the quarter, one of the lowest quarterly revenues compared to its last four quarters.

As part of this downtrend, the bank’s income for the same quarter dropped by 40% year-over-year, bringing it to $4.9 million. As a result, investors might want to consider this a warning sign as it could signal a constriction in the bank’s cash flow and liquidity. This is important because these metrics are key aspects of how regional bank stocks generate returns and further investor interest.

Should BCAL continue this financial downtrend, it’s likely to wind up like the former Silicon Valley Bank which collapsed from a liquidity crisis. To avoid this, the company has initiated a merger of equals with another California bank known as California Bancorp (NASDAQ:CALB) but it is uncertain how long this could stave off losses.

On the date of publication, Viktor Zarev did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.

Viktor Zarev is a scientist, researcher, and writer specializing in explaining the complex world of technology stocks through dedication to accuracy and understanding.

Articles You May Like

Cathie Wood says her ‘volatile’ ARK Innovation fund shouldn’t be a ‘huge slice of any portfolio’
Greenlight’s David Einhorn says the markets are broken and getting worse
Activist ValueAct is poised to trim fat and help boost profits at Meta Platforms. Here’s how
Dental supply stock rallies on theory RFK’s anti-fluoride stance will prompt more dentist visits
Processed food stocks fall as investors brace for increased scrutiny under Trump, RFK Jr.