While Uncle Sam again got quickly in front of the collapse of First Republic (OTCMKTS:FRCB) – the third bank failure of the year so far – investors might want to take heed of the worst bank stocks 2023. From there, they’ll probably want to steer clear until circ*mstances substantively improve.
As an op-ed from MarketWatch stated, the recent financial implosions may just be the start of a lengthy banking crisis according to historical trends. Intuitively, this makes sense. After all, banks don’t just fail without reason, especially in a modern economy. Just as a common-sense strategy, concerned investors may want to identify certain bank stocks to sell.
Finally, the federal government cannot indefinitely support these so-called bank bailout stocks. Arguably, policymakers made the right decision regarding the early list of bank failures in 2023. However, authorities don’t want to push their luck too much. With that, below are bank firms you’ll probably want to avoid.
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SHF Holdings | $0.50 | |
Citizens Financial Services | $82.69 | |
HomeStreet | $6.17 | |
Western Alliance | $27.32 | |
ECB Bancorp | $11.24 | |
PacWest Bancorp | $5.97 | |
First Foundation | $4.35 |
SHF Holdings (SHFS)
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Even before diving into the details, shares of SHF Holdings (NASDAQ:SHFS) trade hands at 51 cents a pop. Just from that alone, SHFS stands on this list of worst bank stocks 2023. Frankly, it’s going to be difficult for the enterprise to regain credibility. Beyond that sticking point, since the beginning of this year, SHFS gave up more than 65% of its equity value.
According to investment resource Gurufocus, SHF has a 50% probability of financial distress (based on its metrics/attributes screener). If a coin toss can determine success or failure, that’s not exactly a confidence booster. Also, while we’re on the topic of the financials, the company only carries middling strengths in the balance sheet. For example, its equity-to-asset ratio sits at 0.05, ranked worse than 88% of other banks.Also, SHF focuses on cannabis banking solutions, representing a volatile and legally ambiguous arena. Again, it just doesn’t do much for confidence, probably making SHFS one of the bank stocks to sell now.
Citizens Financial Services (CZFS)
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Headquartered in Mansfield, Pennsylvania, Citizens Financial Services (NASDAQ:CZFS) doesn’t immediately strike investors as ranking within the bank stock crash of 2023 list. Although CZFS cratered in March when the banking crisis initially erupted, it recovered quite nicely. Since the beginning of this year, CZFS gained over 14% of its equity value. And in the past 365 days, it’s up nearly 29%.
Nevertheless, Citizens Financial seems problematic because of its vulnerable balance sheet. Right now, its cash-to-debt ratio sits at 0.11. This stat ranks worse than 92.31% of sector players, dubiously earning its inclusion within the worst bank stocks 2023 list. Also, its debt-to-equity ratio comes in unfavorably high at 1.35, worse than 70.64% of its peers.Also, the market prices CZFS at a forward multiple of 12.78. This stat ranks worse than 94.36% of the competition. Thus, it might be flirting with a future list called bank failures 2023.
HomeStreet (HMST)
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Based in Seattle, Washington, HomeStreet (NASDAQ:HMST) provides financial services to clients primarily on the west coast: Washington, Oregon and California. It also has a presence in Hawaii. Right off the bat, HMST potentially ranks among future bank bailout stocks. Since the start of the year, HMST gave up more than 77% of its equity value. In the trailing one-year period, it’s down 84%.
Financially, HomeStreet may suffer from the same circ*mstance underlying Citizens Financial Services above; namely, a vulnerable balance sheet. Presently, HomeStreet’s cash-to-debt ratio sits at 0.18 times, ranked worse than 88.25% of other financial institutions. Also, its equity-to-asset ratio only managed to reach 0.06 times. In contrast, the sector median stands at 0.09 times.
To be fair, HMST seems incredibly undervalued. For instance, the market prices shares at a trailing multiple of 2.31. Supposedly, this stat ranks better than 97.43%. However, with HomeStreet’s top line shrinking recently, the company could be a value trap. Thus, it might make the list of worst bank stocks 2023.
Western Alliance (WAL)
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Hailing from Phoenix, Arizona, Western Alliance (NYSE:WAL) is a regional bank concentrated in western states. Per its public profile, the company is one of the largest financial institutions in the nation. However, it’s risking a dubious entry to the worst bank stocks 2023 list. Since the start of this year, WAL gave up almost 54% of equity value. In the past 365 days, it’s down more than 65%.
Financially, Gurufocus identifies three red flags: asset growth accelerates faster than revenue growth, it suffers from a low Piotroski F-Score (implying poor business operation) and also ails from poor financial strength. For the latter, a high debt load may be the culprit. Indeed, with a cash-to-debt ratio of 0.22 (worse than 86% of the competition), WAL has a credibility challenge.To be fair, the enterprise enjoys strong long-term revenue growth and excellent net margin. Nevertheless, with the company’s first-quarter sales fading conspicuously, WAL could be one of the bank stocks to sell now.
ECB Bancorp (ECBK)
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Headquartered in Engelhard, North Carolina, ECB Bancorp (NASDAQ:ECBK) hasn’t suffered as badly in the charts as other candidates for worst bank stocks 2023. Nevertheless, the red ink presents a garish profile. Since the Jan. opener, ECBK gave up 31% of its equity value. Now, in the trailing year, it mitigated the loss, down “only” about 21%. Still, it’s probably a name you’ll want to avoid.
As with other possible bank bailout stocks, ECB Bancorp suffers from a vulnerable balance sheet. In particular, its debt-to-EBITDA ratio pings at 6.95. That’s well above the sector median stat of 1.79, which is unfavorable. As well, Gurufocus warns that ECBK incurs poor financial strength and poor quality of earnings.Further, ECBK trades at 34.97-times trailing earnings. This stat ranks worse than 95.74% of the competition. Given the vagaries of the broader financial and economic environment, investors should probably steer clear of this challenged enterprise.
PacWest Bancorp (PACW)
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While it’s always difficult to predict major developments such as enterprise-level implosions, PacWest Bancorp (NASDAQ:PACW) flirts with extreme danger. Here’s the deal. On May 6, PACW gained nearly 82% of equity value. On surface level, that would seem a massive breakthrough. However, for last week, shares lost slightly over 43%. That’s how much PACW has fallen.
Moreover, since the beginning of this year, PACW gave up almost 75% of market value. Basically, the company’s on life support. If shares fail to pop above the $10 resistance barrier quickly, they could easily rank among the worst bank stocks 2023.Financially, PacWest has significant vulnerabilities in the balance sheet. Notably, its equity-to-asset ratio sits at 0.06, worse than 80.33% of sector rivals. Also, its debt-to-equity stands at an unsightly 4.6 times. In sharp contrast, the sector median is only 0.75 times.Also, with below-average revenue growth and a trailing-year net margin of 70.84% below zero, you could see PACW on a future list of bank failures 2023.
First Foundation (FFWM)
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Founded in 1990, First Foundation (NASDAQ:FFWM) is a regional enterprise offering various services, including banking, trusts, financial planning, investment management and estates, among others. Sadly, a feel-good story won’t save FFWM from potentially falling into the worst bank stocks 2023 list. Since the start of the year, shares plunged 68% and continues to accelerate lower. Just last week, FFWM gave up 27% of equity value.
In the past 365 days, FFWM fell a staggering 79%. Therefore, only investors with crystal balls should bother even thinking about First Foundation. Again, a similar narrative to other bank stocks to sell now arises: vulnerabilities in the balance sheet. Here, the debt-to-equity ratio soared to 2.02 times, ranking worse than 83.62% of sector players.
As well, Gurufocus warns that FFWM is a possible value trap. While the market prices shares at a trailing multiple of only 2.94, it might be deceptive. In Q1 of this year, First Foundation’s revenue was $53.7 million. In contrast, in Q1 2022, the company posted sales of $88.1 million.You should probably get out while you have the chance.
On the date of publication, Josh Enomoto 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.comPublishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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