Banks serve as the backbone of the economy, facilitating lending, deposits, and financial services that keep businesses and consumers moving forward. But worries about an economic slowdown and potential credit deterioration have kept sentiment in check, and over the past six months, the banking industry’s 4.7% return has trailed the S&P 500 by 1.5 percentage points.

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. Taking that into account, here are three bank stocks that may face trouble.

Seacoast Banking (SBCF)

Market Cap: $2.51 billion

Founded during the Florida land boom of 1926 and surviving the Great Depression, Seacoast Banking Corporation of Florida (NASDAQ: SBCF) is a financial holding company that provides commercial and retail banking, wealth management, and mortgage services throughout Florida.

Why Does SBCF Worry Us?

1. Muted 3.6% annual revenue growth over the last two years shows its demand lagged behind its bank peers
2. Earnings per share fell by 12% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
3. Annual interest expenses are high relative to its profits, increasing the probability of its failure to meet certain borrowing obligations

Seacoast Banking’s stock price of $29.18 implies a valuation ratio of 1.1x forward P/B. To fully understand why you should be careful with SBCF, check out our full research report (it’s free).

Peoples Bancorp (PEBO)

Market Cap: $1.12 billion

Founded in 1902 in Ohio and expanding through both organic growth and acquisitions, Peoples Bancorp (NASDAQ: PEBO) is a financial holding company that provides banking, insurance, equipment leasing, and investment services to consumers and businesses.

Why Are We Wary of PEBO?

1. Demand will likely fall over the next 12 months as Wall Street expects flat net interest income
2. Tangible book value per share stagnated over the last five years and signals the need for new capital management strategies
3. Low interest coverage ratio indicates the company may struggle to service its debt obligations if operational performance deteriorates

Peoples Bancorp is trading at $32.38 per share, or 1x forward P/B. Read our free research report to see why you should think twice about including PEBO in your portfolio.

Citigroup (C)

Market Cap: $165.7 billion

With operations in nearly 160 countries and a history dating back to 1812, Citigroup (NYSE: C) is a global financial services company that provides banking, investment, wealth management, and payment solutions to consumers, corporations, and governments.

Why Are We Hesitant About C?

1. Large revenue base makes it harder to expand quickly, and its annual net interest income growth of 5.7% over the last four years was below our standards for the bank sector
2. Estimated net interest income growth of 2.6% for the next 12 months implies demand will slow from its four-year trend
3. Inferior net interest margin of 2.4% means it must compensate for lower profitability through increased loan originations

At $88.72 per share, Citigroup trades at 0.8x forward P/B. Dive into our free research report to see why there are better opportunities than C.

High-Quality Stocks for All Market Conditions

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

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