The tremors of an unsettling banking crisis continue to shake the U.S. market landscape, putting investors on high alert. The unnerving drop in bank stocks has unsettled Wall Street, suggesting that it may be time to contemplate bank stocks to sell.
Fears of substantial unrealized losses and ominous warnings over the banking outlook by experts paint a grim picture. The looming specter of a U.S. government debt default adds another layer of distress. In this unsettling maze of risk, investors consider which overvalued bank stocks to sell.
It’s crucial to remember that even with the Federal Reserve’s implicit backing, these stocks can still be fraught with risk for investors. While depositors have historically been shielded, the same safety net is not extended to investors. Therefore, it’s more critical than ever to consider high-risk bank stocks.
Bank Stocks to Sell: PacWest Bancorp (PACW)
PacWest Bancorp (NASDAQ:PACW) is a Los Angeles-based regional bank that has had an incredibly rough outing in the stock market in the past year. It shed more than 70% of its value, in the past year, on the back of a slowdown in its financial results and the macro-economic turmoil.
Moreover, a recent regulatory filing disclosed that it had lost 9.5% in deposits over a week. This information came as a major shock to Wall Street, given just weeks prior, PacWest Bancorp announced that its deposits had stabilized.
The bank’s first-quarter sales came in at just $285 million, representing nearly a 9% drop from the $312 million in sales it reported in the same period last year. On the bottom line, PacWest reported a significant pretax loss of $1.26 billion, a major contrast to the pretax income of $162 million it posted in the first quarter of 2022. These results point towards a challenging path ahead for the regional bank.
Citizens Financial Services (CZFS)
Pennsylvania-based Citizens Financial Services (NASDAQ:CZFS) doesn’t instantly appear as a candidate in the bank stock crash of 2023. Moreover, its stock has performed relatively better than its peers. However, beneath the surface, trouble brews. The bank’s balance sheet presents vulnerabilities, casting a shadow over its financial stability. This raises questions about its ability to weather future economic storms.
For instance, its cash-to-debt ratio of 0.11 is worse than 93% compared to its competition. Also, its debt-to-equity figure of 1.35 is worse than 71% compared to its peers. On top of that, its cash from operations figure is at just 31.6 million, worse than 79% of its peers. Consequently, GuruFocus assigns a financial score of 3/10, pointing to a troubling outlook ahead for the firm.
Seattle-based HomeStreet (NASDAQ:HMST) offers financial services to its clients across the west coast, with a footprint spanning Washington, Oregon, California, and Hawaii. However, it faces multiple headwinds in growing its customer base and maintaining its deposit. Growth rates have been firmly in the negative in the past year and are expected to stay that way based on forward estimates.
In its first quarter, the bank saw an uptick in the average yield of interest-earning assets by 0.8% year-over-year. But this hasn’t been enough to outpace the growing cost of interest-bearing liabilities, which have surged by 2.26% over the same period. This imbalance has led to a contracting net interest margin, painting a significant challenge for the firm. The slowdown in top-line growth is reflected in the 85% drop in its price return in the past year, a trend that continues to get worse.
On the date of publication, Muslim Farooque 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