While concocting a list of the worst regional bank stocks to sell now naturally sets a negative tone, here’s the reality. Recently, the AP warned that the banking crisis isn’t over yet. Fundamentally, the question of the news agency centers on the magnitude of pain. Frankly, it’s difficult not to at least acknowledge that regional financial firms still face significant challenges.
Fundamentally, if banking calamities were so easy to solve, government agencies would pull their magic levers all the time. Without getting into the granularity, though, we already see what pulling these magic levers do. For example, Uncle Sam saved us during the worst of the Covid-19 pandemic. However, once those fears subsided, an economic obstacle (i.e. soaring inflation) took hold. Unfortunately, the list of regional bank failures in 2023 can still grow.
To be sure, I can’t say with absolute certainty that the below enterprises will fail. However, the federal government made it abundantly clear that it will not protect shareholders of failed banks. Therefore, you should be aware of potential entries into the list of regional bank stock crash 2023.
Central Valley Community Bancorp
Blue Ridge Bankshares
Ottawa Savings Bancorp
Customers Bancorp (CUBI)
Source: shutterstock.com/Leonid Sorokin
Let’s get right into our discussion of the worst regional bank stocks with Customers Bancorp (NYSE:CUBI). On Cinco de Mayo, CUBI popped up slightly over 19%, which seems like an encouraging development. However, in the week ending May 5, CUBI gave up nearly 14% of its equity value. Since the start of the new year, shares plunged 32%. Frankly, it needs to start making a quick dash to $25 to generate baseline confidence.
Financially, Gurufocus warns that Customers Bancorp may represent a possible value trap. Honestly, it’s not difficult to see why. At the moment, the market prices CUBI at a trailing multiple of 3.26. That sounds incredibly undervalued, ranked better than 94% of other competing banks. As well, the company posts an impressive three-year revenue growth rate of 24.4%. But in the first quarter of 2023, revenue came out to $163.4 million, 11% below Q1 2022’s tally of $183.6 million. Put another way, CUBI’s total addressable market may be declining. Therefore, the low multiple deserves an asterisk.
Central Valley Community Bancorp (CVCY)
Last Friday, shares of Central Valley Community Bancorp (NASDAQ:CVCY) showed movement, though they ended at parity against the prior close. In the week ending May 5, CVCY gave up over 9% of its equity value. In the past 30 days, it slipped almost 29%. And since the Jan. opener, CVCY fell 36%. On a technical level, the continued deceleration is worrying so conservative investors may treat it like one of the worst regional bank stocks.
As with Customers Bancorp above, Gurufocus warns that Central Valley may be a possible value trap. Here, the market prices CVCY at a forward multiple of 6.06. As a discount to projected earnings, Central Valley ranks better than 70.34% of the competition. Still, in Q1 of this year, the bank posted revenue of $22.56 million, up nearly 18% year-over-year.
However, the investment resource also points out that Central Valley’s Piotroski F-Score is only 3, which usually implies poor business operation. Also, the company’s asset growth is faster than revenue growth, implying less efficiency. Therefore, while CVCY might not be one of the regional bank failures in 2023, it lacks upward credibility.
Blue Ridge Bankshares (BRBS)
Last Friday, shares of Blue Ridge Bankshares (NYSEAMERICAN:BRBS) popped nearly 6%. In any other circumstance, the performance may have inspired confidence among market participants. However, BRBS may be one of the worst regional bank stocks to sell now. In the week ending May 5, shares plunged nearly 21%. Since the beginning of this year, they cratered to the tune of almost 39%.
Technically, I don’t like the pace of deceleration. Buying shares seems akin to catching falling knives. On the financial front, Gurufocus again warns about value traps. Right now, Blue Ridge features a price-to-sales ratio of 0.98, ranked lower than 85% of the competition. However, the problem centers on recent stats. In Q1 of this year, the company posted $34.6 million in sales, down nearly 28% YOY.
Therefore, the apparent sales discount deserves a Houston Astros-sized asterisk. Another problem centers on its poor profitability. Right now, its trailing-year net margin is 8.09%, ranked worse than 90.43% of companies in the banking industry. So, it might not be one of the regional bank stock crash in 2023, but it’s not a winner.
Ottawa Savings Bancorp (OTTW)
On a surface level, Ottawa Savings Bancorp (OTCMKTS:OTTW) only lost less than 1% on Cinco de Mayo. And in the week ending that cultural celebration, OTTW dipped only 2%. That’s a winner when you consider the other worst regional bank stocks. However, since the January opener, OTTW gave up almost 22% of its equity value. Frankly, it hasn’t handled the current banking crisis well.
Again, as with the other names of regional bank stocks to sell now, Gurufocus warns that OTTW may be a possible value trap. Notably, the market prices OTTW at 0.63 times tangible book value. Also, Ottawa’s three-year revenue growth rate pings at 11.2%, above 72.77% of the competition. That all sounds great looking broadly at the canvas. Unfortunately, Ottawa’s Q4 2022 revenue came in at $3.22 million, down more than 8% against the year-ago quarter’s tally of $3.51 million. Fundamentally, the issue centers on potentially rising hardships over the next several months. The possibility of a recession might not help Ottawa’s addressable market.
It might not be one of the regional bank failures in 2023. However, it’s difficult to see a winner here.
CBB Bancorp (CBBI)
Posting an okay performance on the May 5 session, shares of CBB Bancorp (OTCMKTS:CBBI) moved up almost 3%. However, that’s about where the smiles fade. In the week ending Cinco de Mayo, CBBI slipped nearly 6%. For the year, it’s looking at losses approaching 11%. To cement the pessimism, CBBI slipped over 36% since its 2017 public market debut. Thus, it ranks dubiously among the worst regional bank stocks.
Interestingly, Gurufocus labels CBB Bancorp as modestly undervalued. I suppose if you want to be contrarian with the regional bank stocks to sell now, CBBI is it. Right now, the market prices shares at 1.22 times trailing sales. As a discount to revenue, the company supposedly ranks better than 78.98% of the sector.
However, the problem is belief in the trend. In Q4 2022, CBB Bancorp posted sales of $21.03 million, down nearly 3% YOY. Also, net income was $7.33 million, down 8.5% YOY. With rising obstacles seemingly on the horizon, CBB Bancorp faces a tough backdrop. To be fair, it might not be one of the regional bank stock crash in 2023. However, it doesn’t seem to show enough for market participants.
Western Alliance (WAL)
On paper, Western Alliance (NYSE:WAL) had a massive day on Cinco de Mayo, shooting up over 49%. However, that performance also cuts both ways. In the week ending Friday, WAL gave up almost 29% of its equity value. Since the Jan. opener, WAL fell nearly 54%. So, even with that outstanding one-day bull run, it has a long way to go to achieve credibility.
One of the worst regional bank stocks, Gurufocus warns that WAL may be a possible value trap. Currently, the market prices shares at a forward multiple of 3.21. Outside of any other context, Western Alliance ranks better than nearly 94% of the competition as a discount to earnings. However, the bank’s Q1 performance presents significant concerns. Namely, its latest revenue haul was only $447 million, down 15.5% from Q1 2022’s tally of $529 million. Also, net income sat at $142 million, down nearly 41% against the year-ago quarter’s result of $240 million.
It’s not looking great for Western Alliance despite last Friday’s boost. And it could be one of the regional bank bailout stocks because of the sharp relevancy loss.
PacWest Bancorp (PACW)
If Western Alliance looked strong last Friday, PacWest Bancorp (NASDAQ:PACW) appeared downright heroic, gaining nearly 82%. You’d think that a near doubling of market value would inspire confidence. Unfortunately, PACW in a zoomed-out context ranks among the worst regional bank stocks to sell now. Last week, PacWest shares still gave up 43%. So far this year, they’re down almost 75%.
From a technical perspective, PACW needs to immediately secure the $10 psychological milestone; otherwise, more volatility could be in order. Unsurprisingly, Gurufocus labels PacWest a possible value trap. Enticingly, the market prices PACW at a forward multiple of 3.26. As a discount to projected earnings, PacWest supposedly ranks better than 92.65% of the industry.
However, Q1 revenue provided a reality check, bringing in only $285 million. This tally slipped nearly 9% against the year-ago quarter’s haul of $312 million. On the bottom line, PacWest also incurred a pretax loss of $1.26 billion. In Q1 2022, it posted pretax income of $162 million. As well, Gurufocus shows that PacWest’s balance sheet appears weak. Unfortunately, PACW runs the risk of sliding into the regional bank failures 2023 list.
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.com Publishing 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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