Bank stocks took a tumble in October 2025, with valuations dropping to their lowest levels in five months. The banking sector faced headwinds that made investors nervous, like watching storm clouds gather on a sunny day.
U.S. Bank provides a clear example of these struggles. The company trades at 5.8 times its revenue, with a market value of $72.6 billion and enterprise value of $157 billion. Even more telling, many banks saw their price-to-adjusted tangible book value ratios decline considerably. First Internet Bancorp hit a particularly low mark at just 42.7%, making it one of the cheapest banks by this measure.
Credit problems played a major role in these valuation drops. Think of credit quality like a bank’s report card – and some grades weren’t looking too good. First Internet Bancorp and Eagle Bancorp both suffered double-digit losses in October due to credit concerns.
U.S. Bancorp saw its provision for credit losses jump 14% from the second to third quarter as loan portfolios shifted. Rising nonperforming assets and delinquency levels added to investor worries.
However, the earnings picture tells a more balanced story. U.S. Bancorp actually reported strong results with net income of $2.0 billion in the third quarter, up 16.7% from the previous year. Earnings per share climbed 18.4% to $1.22, while return on tangible common equity improved to 18.6%. The bank’s extensive operations across 26 states give it significant geographic diversification compared to many regional competitors.
The bank’s net interest margin strengthened to 2.75%, showing healthy profitability beneath the surface turbulence. Despite market volatility, U.S. Bank achieved strong positive operating leverage of 250 basis points year-over-year.
Market sentiment remains mixed, like a weather forecast calling for both sun and rain. Some banks experienced brutal returns, with First Internet Bancorp posting a negative 20.9% total return in October.
Meanwhile, the broader S&P 500 trades at elevated valuations around 25.4 times earnings, creating an odd contrast with beaten-down bank stocks.
Capital strength provides some reassurance. U.S. Bancorp maintains a solid capital ratio of 10.9%, suggesting adequate financial cushioning.
While analysts expect positive earnings growth ahead, credit quality concerns continue weighing on investor minds, keeping bank valuations under pressure for now.
