Customers Bancorp trades at $78.73 per share and has stayed right on track with the overall market, gaining 7.9% over the last six months. At the same time, the S&P 500 has returned 11.3%.

Is now the time to buy Customers Bancorp, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Why Is Customers Bancorp Not Exciting?

We don’t have much confidence in Customers Bancorp. Here are three reasons you should be careful with CUBI, plus one stock we’d rather own.

1. Net Interest Income Points to Soft Demand

Net interest income commands greater market attention due to its reliability and consistency, whereas one-time fees are often seen as lower-quality revenue that lacks the same dependable characteristics.

Customers Bancorp’s net interest income has grown at a 9.5% annualized rate over the last five years, slightly worse than the broader banking industry and in line with its total revenue. Its growth was driven by both an increase in its outstanding loans and net interest margin, which represents how much a bank earns in relation to its outstanding loan book.

2. Low Net Interest Margin Reveals Weak Loan Book Profitability

Net interest margin (NIM) represents the unit economics of a bank by measuring the profitability of its interest-bearing assets relative to its interest-bearing liabilities. It’s a fundamental metric that investors use to assess lending premiums and returns.

Over the past two years, we can see that Customers Bancorp’s net interest margin averaged a subpar 3.2%. This metric is well below other banks, signaling its loans aren’t very profitable.

3. EPS Barely Growing

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Customers Bancorp’s EPS grew at a weak 4.2% compounded annual growth rate over the last five years, lower than its 10.4% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.

Final Judgment

Customers Bancorp isn’t a terrible business, but it doesn’t pass our quality test. That said, the stock currently trades at 1.2× forward P/B (or $78.73 per share). This valuation multiple is fair, but we don’t have much faith in the company. We’re fairly confident there are better stocks to buy right now. We’d recommend looking at the most dominant software business in the world.

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