While it is true that many financial stocks have rebounded in the market this year thanks to high profitability levels and increased demand, some have not enjoyed this same turn of fortune. The financial industry remains one of the most profitable industries in the world. However, there are many reasons that could cause financial stocks to perform poorly.
Even now, when the industry is enjoying a resurgence following a period of hardship that included multiple meltdowns, most notably Silicon Valley Bank, there are still several financial stocks that wouldn’t be smart investments.
A combination of low revenue generation, inability to facilitate lending and other financial services, and low liquidity of the target audience make them unattractive options for investors interested in financial stocks.
This article highlights three of these financial stocks that every investor should steer clear of or sell before 2025.
Comerica (CMA)
Comerica (NYSE:CMA) is an American financial services company with over four hundred branches across the US, such as Texas, Michigan, California, Florida, and Arizona.
On paper, Comerica seems like an ideal investment option for investors interested in financial stocks. Its market cap sits around $7.4 billion, and it caters to a wide range of customers across the country. However, a closer look at the news surrounding the company tells a different tale.
A great example is its recent delisting from the S&P 500. In a recent news release from Fortune 500, it was announced that Comerica, along with two other companies, had been delisted from the S&P 500. While no official reason was given for the turn of events, it is most likely because stocks in the S&P 500 must have a market cap of $12.7 billion or more for inclusion.
Furthermore, although the company’s second-quarter results beat analysts’ estimates, its shares still tumbled in the market. As a result, the US Treasury has informed Comerica that it will not be selected to continue exclusively providing the Direct Express Card.
According to the report, the company’s net income fell to $206 million from $273 million, but it beat analysts’ estimates of $165.4 million.
KeyCorp (KEY)
KeyCorp (NYSE:KEY) is the holding company for KeyBank National Association, an American bank based in Cleveland, Ohio. One of the top 30 largest US banks, it’s notable for providing various retail and commercial financial products and services. It is also notable for its high dividend rate, which currently sits at around 5.50%.
However, if you’re considering investing in KeyCorp or have already invested in it, you might want to reconsider. Recent news surrounding the company has been abysmal, most notably its recent quarterly report. According to the report, KeyCorp performed poorly across all key metrics, such as revenue and net income.
It generated a quarterly total revenue of $1.53 billion, declining by 4.3% year-over-year. Furthermore, its net income from continuing operations attributable to common shareholders fell by 5.2% to $237 million.
In a year marked by extreme profitability for financial stocks, KeyCorp is one of the few that have been unfortunate. Whether the stock can rebound this year remains to be seen, but it is definitely high on your sell list.
SoFi Technologies (SOFI)
SoFi Technologies (NASDAQ:SOFI) is an American personal finance company and online bank based in San Francisco, California. The company offers several financial products, including student loan refinancing, mortgages, personal loans, credit cards, investing, and banking.
Financially, SoFi Technologies has not performed poorly this year. On the contrary, it has put up impressive numbers in that department, as seen by its latest quarterly report. According to the report, the company generated a net revenue of $645 million and a net income of $88 million.
This places it among some of the most profitable companies in the financial sector. The concern from an investor standpoint, however, is whether it will be able to keep up this profitability considering that one of its major products is student loan refinancing, and students don’t usually have a high overall net worth or capital liquidity. The company currently places emphasis on personal lending, which exposes it to high borrower credit risk.
On the date of publication, Joel Lim 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.
On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.