Smart Money’s 18-Month Playbook for U.S. Bank Stocks
A data-driven review of 190 U.S. banks using ROTCE, TBVPS, and EPS growth. See which bank stocks smart money is buying, avoiding, and watching over the next 18 months.
Full analysis of the top 190 U.S. banks using ROTCE, TBVPS, EPS growth, and AI insights. Names to buy, fade, and watch through 2026.
I grew up learning banks. Not because they were easy, but because they were everywhere, and understanding them meant understanding how the financial system actually moves. Banks are strange businesses. Really strange. To outsiders, they look like commodity lenders. To insiders, they are fragile leverage engines with embedded option value. They are confusing, often opaque, and frequently misunderstood. They rely on metrics no other industry touches: NIM, efficiency ratio, ALL, NCO. And their earnings rise and fall with the tides of interest rates. Much like stablecoins, but with FDIC stickers and congressional oversight.
But if you can read through the complexity and tune out the panic cycles, banks become exceptional long-term investments. Especially when the crowd writes them off.
Most generalist investors do not really understand how banks work. They understand equity narratives, not balance sheet dynamics. They see headlines, not franchise value. They hear “NIM compression” and assume earnings collapse. What they miss is that banks are compounding machines. They are built on leverage, funding discipline, and the operating rhythm of the U.S. economy. And the best long-term performance comes from two places. One, buying them when everyone else thinks the world is ending. Two, holding onto the strong ones that compound quietly, year after year, growing book, lifting returns, and staying out of the news.
So behind the paywall, I’m sharing my custom screen across the top 200 banks. You’ll get the full breakdown on EPS and TBVPS CAGR, ROTCE versus P/TBV, and forward P/E compared to forward earnings growth. I’ve included a ranked list of names I want to own, the ones I’m avoiding, and a few that might surprise you. I also had my AI bank analyst run its own rankings using the same dashboard. The results were better than expected. At this point, I may be putting myself out of a job.
If you want the sheet and you’re a paid subscriber, all you have to do is DM me.
Some 30,000 Foot Trends
I’ve been pretty vocal about this, but we’re entering an inflection point across the banking sector, one that’s being ignored by most of the market. After two years of margin compression, deposit dislocations, regulatory tightening, and valuation trauma, the core drivers of long-term value in banks are finally turning. And they’re doing so in a way that could shift the market’s entire perception of what these companies are worth.
Earnings Growth Is Quietly Returning
First, earnings growth is quietly returning. Not the kind of rebound off zero that gets dismissed as noise, but real, forward earnings growth driven by stabilizing funding costs, loan growth, and incremental yield curve normalization. The curve remains inverted, but less so than a year ago, and the path of change matters more than the absolute shape. As short-end pressures ease, banks that suffered from deposit pricing catch-up are starting to recover margin. And with credit staying mostly benign, the bottom half of income statements are holding up better than feared.
The Regulatory Climate Is Shifting
Second, the regulatory climate is shifting. We’re not back to pre-2008 looseness, but we’re clearly exiting the post-SVB tightening panic. Banks passed their stress tests. Capital ratios are solid. And the political environment points toward reduced capital burdens, faster M&A approval, and more flexibility around payout and buyback policy. That’s a material unlock for return on equity and for how investors model these stocks going forward.
Valuations Remain Dislocated
Third, valuations remain dislocated. Many banks are still trading at post-GFC multiples despite balance sheets that are cleaner, more liquid, and better managed than they were even five years ago. The forward setup may not return us to the wild days of 2.5x TBV, but there’s a reasonable case that select names shift back toward pre-GFC relative valuations, especially those growing tangible book at 6-8% with ROTCEs above 13%.
Positioning & Sentiment
While it’s improved as of late, the positioning in banks is still somewhat bearish. Not because investors are aggressively short, but because they’ve structurally underweighted the entire sector. Banks are underowned, unloved, and misunderstood. Funds de-weight them due to volatility and the potential for recession risks. Macro tourists keep waiting for the next credit scare. And retail attention has all but evaporated with the recent rush into unprofitable “FinTech” companies like payday lenders with a slick UX and more recently the Great Crypto Boom of July 2025.
Yet that structural avoidance creates opportunity. When everyone is already underweight, and fundamentals improve even slightly, the marginal buyer can move price sharply. That happened already with KBWB, the big bank ETF, and is happening again with KRE, the regional bank ETF. At the same time, it’s critical to remember that banks are still levered beta. They don’t get the benefit of the doubt in a recession, because their money is made lending to American businesses. So if the market whiffs a credit event or unemployment spike, banks will sell off fast and indiscriminately. That’s the cost of owning credit optionality in the space.
But that’s also why the upside is asymmetric. You don’t need to time the bottom, you just need to be early enough that when sentiment shifts, you’re already in the right names—those with the capital, earnings durability, and self-funding engine to outperform through the noise.
Building A Useful Screen
Bank investing isn’t about vibe. It’s about structural efficiency, capital compounding, and the discipline to ignore cosmetic growth. You don’t need to own the banks with the highest earnings growth. You need to own the ones that grow through the cycle, maintain ROEs in good and bad years, and compound tangible book faster than their peers. That’s kind of it. And that’s how I built out my screen and how I mold my thinking, right or wrong.
Step 1: Backwards Looking EPS And TBVPS CAGR
Start with backwards looking EPS and TBVPS compounding rates, CAGRs as CFA types like to say. You can use this as a proxy for if management is making the right decisions with shareholder capital. Because as NVDA shows us, the market rewards durable EPS growth, and in banks the market also rewards durable TBVPS growth. For the purposes of this screen I used trailing 2018-2024 FY numbers. What do you learn? To be the cream of the crop, you need to CAGR both metrics around 7%.
Step 2: Forward ROTCE Relative To P/TBV
Next you need to look at Forward ROTCE relative to P/TBV. A 13% ROTCE is solid, but only if you’re not paying 2x book for it. A lot of banks in today’s market are still earning mid-teens returns and trading below 1.6x TBV. The real unlock comes when you find ROTCE >13% at valuations that are priced like a low-growth loser. This also introduces some subjectivity, which I’m okay with, but you need to understand. As you start to build out analysis using forward estimates, you have to realize these are guesses, not promises based on management guidance plus a macro environment that may not come.
Step 3: Forward EPS Growth Relative To Current P/E
Lastly, we layer in forward EPS growth (yes in 2026) relative to current P/E. I used 2026 because I’m looking to see who has the most torque to improving interest rates (a feature of bank analyst forward estimates) and not because I believe them carte blanche. I also subjectively screened out the top tier EPS growth banks, the ones with 30% or 50% out year EPS growth. Why? Because this implies they nuked 2024 and 2025 earnings with bad decisions. The right banks are those growing EPS at 10-20% annually, with a forward P/E under 12x.
Then you take all of these and I get to subjectively pick ones I like. In vibes we trust. I’ll share a list of names I like right now and then my AI insights for kicks. At the end I have a few timeless lessons.
If you’d like a copy of the PDF, please send me a DM on the app with your email.
The Results
Some Short & Sweet Picks
Going into earnings season, remember that buying names can be a bit volatile. If you’re the type to want to wait, you should. Also, this is clearly NFA. These are my thoughts and opinions.
There’s also a lot of nuance behind the numbers. There are reasons why some banks trade cheaply despite tremendous past results or potential future scenarios. And that is where the art and science is.
Page 1 Picks
C: Screens tremendously well, still cheap, big time out year EPS growth. I own in size and it is just crushing it.
WAL: Same story, perpetually beaten down with some “valuation overhang” from their near death experience. If you like growth this one’s for you.
WBS: Cheap due to CRE risk, if you feel like NE CRE is overhyped this is a great long.
UMBF: I’ve never owned but like it. Surprisingly strong back year EPS and TBVPS CAGR with top tier ROTCE.
BPOP: Screens tremendously well, like it and own it.
ABCB: Total sleeper here, the results are strong, great forward profile in the Southeast. Was surprised to see how good they look.
OZK: Same story as WBS. If you feel like the world is wrong, buy Gleason’s bank.
Page 2-5 Picks
TBBK: The Fintech horse, it’s hard to overstate how strong their business model is. Tremendous EPS/TBVPS CAGR plus top tier ROTCE and out year EPS growth.
FRME: Another off the beaten path one that has CAGR’d TBVPS well and has a fair multiple with strong EPS growth.
CUBI: Everyone loves to hate on Sidhu, but the numbers are undeniably good.
CASH: Same story as TBBK, top top tier results due to their Fintech niche.
CCB: One more for the Fintech niche pile, partnership with HOOD, top tier EPS growth in out years.
NBN: The FDIC insured private credit fund with top tier EPS and TBVPS CAGRs and top tier ROTCE.
HAFC: Catching a bid of late, fairly valued with cheap valuations and decent forward EPS growth.
SMBC: Pure sleeper that more people should know about, screens well, compounds TBVPS and has some curve steepening juice to it.
UNTY: Love this one, quietly the little engine that could of EPS and TBVPS CAGR, a top tier ROTCE and great earnings growth relative to forward P/E.
The Shorts
I prefer to talk about these in DMs.
Things I Learned (Or Re-Learned)
ROTCE Is Only Part Of The Equation
On its own, ROTCE tells you what a bank earns this year. But real value creation comes from sustaining high ROTCE while growing book year after year. That is what drives long-term multiple expansion and shareholder returns, not just short-term profitability. That’s part of why a FFIN trades where it does.
Most 30%+ EPS Growth Banks Are Repair Stories
Most of the banks showing 30% or higher EPS growth in 2026 are not growth stories. They are repair stories, like an AMTB or DCOM. When you see a forecast that steep, it usually means earnings collapsed in 2025. That isn’t expansion, it’s triage. And the market often misreads it as momentum, when what it really reflects is fragility or worse, bad management.
Tangible Book Compounding Is Underappreciated
The compounding of tangible book remains one of the most underappreciated signals in bank investing. A bank growing tangible book at 7% a year (post dividends) while earning a 13% ROTCE and trading at 1.4x book is quietly delivering equity IRRs that aren’t far from high growth companies. It may not scream growth, but when a bank compounds capital at that pace, and you’re not overpaying for it, you’re capturing double-digit returns without the hype.
Bank Shorts Are Often Structural
Bank shorts are often structural rather than strategic. Hedge funds short regionals by default. Passive models underweight the sector because of its beta and macro sensitivity. That creates mispricing in the names with clean balance sheets, improving earnings, and stable funding. These aren’t momentum shorts, they are flow shorts. And when the flows reverse, they rerate quickly.
The Steepener Setup Is Right In Front Of Us
The steepener setup is sitting right in front of us. As the curve moves from inversion toward positive slope, banks with strong core funding and disciplined cost bases will experience surges in net interest income. Add in benign credit, and you have the foundation for earnings acceleration. Most investors will miss this because they are anchored to 2023’s chaos. But spread-based banks don’t need blue skies. They just need slope and stability.
Forward P/E Multiples Are Too Tight
Most banks still trade within one to two turns of each other on forward earnings, regardless of return on capital. You can find a 15% ROTCE bank and a 10% ROTCE bank both trading at 12x earnings. That spread is too tight, and that inefficiency is where alpha hides. If you can isolate return quality and durability, you can buy the better compounder without paying a premium.
We Are In The Numb Phase Of Sentiment
Right now, we are in the numb phase of sentiment. The panic was in 2023, the apathy is now. This is the point in the cycle where smart capital starts buying exposure quietly, while the crowd is still looking elsewhere.
Until next time,
Victaurs
The Top 15 & Bottom 15 From My AI Bank Analyst
For kicks, I fed this report and only this report into CGPT in Deep Research mode. I asked it to factor in each of the key principles.
Looking for top tier CAGR of EPS & TBVPS. Looking for high or above average ROTCEs with not too expensive P/TBV. Looking for strong out year EPS growth, but not too strong and a cheap Forward P/E.
Remember AI does not know their balance sheets, management teams, or any of the nuance, because I literally limited it. But the results were fun and I think I may have replaced myself.
Top 15 Longs
1. Citigroup (C)
Deep value play with 20%+ EPS growth and tangible book protection—classic re-rating setup.
2. Western Alliance (WAL)
High ROTCE and double-digit EPS growth at under 10x P/E. Clean, strong, mispriced.
3. The Bancorp (TBBK)
Outlier ROTCE and growth, still trades at fintech-bank multiples. Serious IRR hiding in plain sight.
4. Unity Bancorp (UNTY)
Compounder under the radar. ROTCE 14.5%, EPS and TBV both growing double digits, still under 11x.
5. Popular (BPOP)
Solid core bank with consistent growth and returns. LatAm risk overstated, valuation compelling.
6. Old National (ONB)
17% ROTCE, integrated M&A, and 18% EPS growth. Trades cheap for what it's delivering.
7. SouthState (SSB)
Quiet outperformer with disciplined credit and strong ROTCE. Not flashy, just effective.
8. Pathward (CASH)
31% ROTCE, low payout, and still trades at 10x. The model works—market just doesn’t get it.
9. Axos (AX)
Fintech-powered bank with high TBVPS growth, efficient margin structure, and value multiple.
10. Southern Missouri (SMBC)
9%+ TBVPS growth, 19% EPS growth, and ROTCE >12%. Classic small-cap compounder.
11. First Merchants (FRME)
13% ROTCE, cheap valuation, clean EPS growth. Needs a catalyst, but fundamentals are there.
12. The First Bancshares (FBMS)
Above-peer ROTCE and double-digit TBV compounding. Undervalued and unnoticed.
13. Stock Yards Bancorp (SYBT)
Premium valuation, but earns it. Consistent mid-teens ROTCE with strong deposit base.
14. Home Bancshares (HOMB)
High-quality serial acquirer with 16% ROTCE and low-credit-risk profile. Steady and proven.
15. German American Bancorp (GABC)
Nearly 18% ROTCE, 21% EPS growth, and stable cost structure. Small, strong, scalable.
Top 15 Fades
1. Columbia Financial (CLBK)
4.5% ROTCE, triple-digit EPS “growth” from nothing, and trades at 31x. Pure optical rebound.
2. Triumph Financial (TFIN)
2.8% ROTCE, speculative payments pivot, and priced like a winner. Earnings don’t support it.
3. Flagstar (NYCB / FLG)
Negative ROTCE, noisy merger model, and capital pressure. Still not cheap enough.
4. Banc of California (BANC)
Low ROTCE, negative EPS growth in 2026, and post-deal promises wearing thin.
5. Pacific Premier (PPBI)
ROE under 7%, shrinking forward earnings, and trades like a stable franchise. It isn’t.
6. Glacier Bancorp (GBCI)
Legacy premium pricing, but TBV and EPS growth falling. ROTCE doesn’t justify multiple.
7. Capitol Federal (CFFN)
Flat to negative TBV and EPS, weak ROTCE, and no catalyst. Still not priced for decay.
8. Stellar Bancorp (STEL)
Merger not working, earnings down, ROTCE soft—and valuation doesn’t reflect it.
9. Comerica (CMA)
10% ROTCE, earnings contraction, and too much CRE beta. Multiple needs to come in.
10. KeyCorp (KEY)
EPS “growth” is just recovery. Credit, cost, and capital still unsettled.
11. Hilltop Holdings (HTH)
4.8% ROTCE, no EPS growth, and 18x P/E. Way too expensive for the fundamentals.
12. WaFd (WAFD)
Sub-10% ROTCE, declining EPS, and trades like it’s protected. It isn’t.
13. Dime Community (DCOM)
Big EPS rebound off a weak base, but no durable ROTCE. Valuation mismatch.
14. Northfield Bancorp (NFBK)
5.7% ROTCE and 40% EPS jump on noise, not strength. Still trades above what it's worth.
15. Amerant Bancorp (AMTB)
Below 8% ROTCE, volatile EPS, and no clear core engine. Trades cheap, but for a reason.