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 robust credit growth, so it’s no surprise the banking industry has posted a 10.2% gain over the past six months, nearly mirroring the S&P 500.

Regardless of these results, investors must exercise caution as many banks are sensitive to interest rate fluctuations and economic cycles. Taking that into account, here are three bank stocks that may face trouble.

WesBanco (WSBC)

Market Cap: $3.22 billion

Tracing its roots back to 1870 in West Virginia, WesBanco (NASDAQ: WSBC) is a bank holding company that provides retail and commercial banking, trust services, insurance, and investment products through its subsidiaries across several Midwestern and Mid-Atlantic states.

Why Do We Think Twice About WSBC?

1. Inferior net interest margin of 3.4% means it must compensate for lower profitability through increased loan originations
2. Products and services are facing profitability challenges during this cycle, as seen in its flat tangible book value per share over the last five years
3. ROE of 6.8% reflects management’s challenges in identifying attractive investment opportunities

At $33.49 per share, WesBanco trades at 0.8x forward P/B. Dive into our free research report to see why there are better opportunities than WSBC.

Trustmark (TRMK)

Market Cap: $2.57 billion

Tracing its roots back to 1889 in Mississippi, Trustmark (NASDAQ: TRMK) is a financial services organization providing banking, wealth management, insurance, and mortgage services across five southeastern states.

Why Does TRMK Fall Short?

1. 9.1% annual net interest income growth over the last five years was slower than its banking peers
2. Estimated net interest income growth of 4.3% for the next 12 months implies demand will slow from its five-year trend
3. Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 4.7% annually

Trustmark’s stock price of $43.79 implies a valuation ratio of 1.1x forward P/B. If you’re considering TRMK for your portfolio, see our FREE research report to learn more.

First Financial Bancorp (FFBC)

Market Cap: $3.14 billion

Tracing its roots back to 1863 during the Civil War era, First Financial Bancorp (NASDAQ: FFBC) is a bank holding company that provides commercial banking, lending, deposit services, and wealth management to individuals and businesses.

Why Are We Wary of FFBC?

1. Sales trends were unexciting over the last two years as its 8.8% annual growth was below the typical banking company
2. Muted 8.4% annual net interest income growth over the last five years shows its demand lagged behind its banking peers
3. Earnings growth underperformed the sector average over the last two years as its EPS grew by just 8.7% annually

First Financial Bancorp is trading at $29.92 per share, or 1x forward P/B. Check out our free in-depth research report to learn more about why FFBC doesn’t pass our bar.

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