Sell National Bank of Greece and 3 Other Big Bank Stocks

NEW YORK (TheStreet) -- It shouldn't be a surprise that investing in the National Bank of Greece (NBG) isn't a smart move given the country's economic woes

Which other global banks should investors stay away from?

The stocks on this list are all diversified banks that are rated "sell" in the financial services sub-industry. When you're done be sure to check out the nine office REITs to buy.

TheStreet Ratings, TheStreet's proprietary ratings tool, projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

Note: Year-to-date returns are based on June 2, 2015 closing prices.

BNS Chart BNS data by YCharts

1. Bank of Nova Scotia (BNS)
Market Cap: $64.5 billion
Year-to-date return: -6.6%

The Bank of Nova Scotia provides various personal, commercial, corporate, and investment banking services in Canada and internationally.

TheStreet Ratings: Sell, D
TheStreet Ratings said: "We rate BANK OF NOVA SCOTIA (BNS) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Net operating cash flow has significantly decreased to -$2,077.00 million or 128.90% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • BNS has underperformed the S&P 500 Index, declining 17.49% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • BANK OF NOVA SCOTIA's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past year. During the past fiscal year, BANK OF NOVA SCOTIA increased its bottom line by earning $5.66 versus $1.29 in the prior year.
  • The gross profit margin for BANK OF NOVA SCOTIA is currently very high, coming in at 73.25%. Regardless of BNS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 22.96% trails the industry average.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Commercial Banks industry average. The net income increased by 0.9% when compared to the same quarter one year prior, going from $1,742.00 million to $1,757.00 million.

 

 

BSMX Chart BSMX data by YCharts

2. Grupo Financiero Santander (BSMX)
Market Cap: $12.8 billion
Year-to-date return: -8.7%

Grupo Financiero Santander Mexico, S.A.B. de C.V., through its subsidiaries, provides a range of financial services to individuals, private banking clients, small and medium-sized enterprises, government institutions, and corporate and institutional customers primarily in Mexico.

TheStreet Ratings: Sell, D
TheStreet Ratings said: "We rate GRUPO FINANCIERO SANTANDER (BSMX) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, deteriorating net income, weak operating cash flow and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Commercial Banks industry average. The net income has decreased by 15.5% when compared to the same quarter one year ago, dropping from $249.62 million to $210.89 million.
  • Looking at the price performance of BSMX's shares over the past 12 months, there is not much good news to report: the stock is down 29.22%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, BSMX is still more expensive than most of the other companies in its industry.
  • Net operating cash flow has decreased to $245.46 million or 36.75% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, GRUPO FINANCIERO SANTANDER has marginally lower results.
  • GRUPO FINANCIERO SANTANDER's earnings per share declined by 16.7% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, GRUPO FINANCIERO SANTANDER reported lower earnings of $0.66 versus $0.69 in the prior year. This year, the market expects an improvement in earnings ($0.73 versus $0.66).
  • BSMX, with its decline in revenue, slightly underperformed the industry average of 0.0%. Since the same quarter one year prior, revenues slightly dropped by 9.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.

 

 

 

 

ING Chart ING data by YCharts

3. ING Groep NV (ING)
Market Cap: $63.9 billion
Year-to-date return: 27.6%

ING Groep N.V., a financial institution, provides banking products and services to individuals, small and medium enterprises, and mid-corporates. It operates through Retail Netherlands; Retail Belgium; Retail Germany; Retail Rest of World; and Commercial Banking segments

TheStreet Ratings: Sell, D
TheStreet Ratings said: "We rate ING GROEP NV (ING) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Commercial Banks industry and the overall market, ING GROEP NV's return on equity is below that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$4,277.07 million or 135.25% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • ING, with its decline in revenue, underperformed when compared the industry average of 0.0%. Since the same quarter one year prior, revenues fell by 16.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Looking at where the stock is today compared to one year ago, we find that it is higher, and it has outperformed the rise in the S&P 500 over the same period. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.

 

 

 

NBG Chart NBG data by YCharts

4. National Bank of Greece (NBG)
Market Cap: $5 billion
Year-to-date return: -21.8%

National Bank of Greece S.A., together with its subsidiaries, provides diversified financial services. The company is involved in retail and commercial banking, asset management, investment banking, brokerage, and insurance activities.

TheStreet Ratings: Sell, D
TheStreet Ratings said: "We rate NATIONAL BANK OF GREECE (NBG) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • NATIONAL BANK OF GREECE has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern earnings per share over the past two years. During the past fiscal year, NATIONAL BANK OF GREECE reported lower earnings of $0.15 versus $1.98 in the prior year.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Commercial Banks industry. The net income has significantly decreased by 284.9% when compared to the same quarter one year ago, falling from $760.10 million to -$1,405.19 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Commercial Banks industry and the overall market on the basis of return on equity, NATIONAL BANK OF GREECE underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 54.52%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 190.90% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • NBG, with its decline in revenue, underperformed when compared the industry average of 0.3%. Since the same quarter one year prior, revenues fell by 23.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

 

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