Improving Credit Outlook, Mergers and Acquisitions, Rising Interest Rates, and Lending Growth Spur Modernization of U.S. Regional Banks

Raymond James analyst Micahael Rose on Thursday raised three regional banks and reduced his opinion on one in anticipation of a rather positive outlook for the sector by 2022.

“We have become increasingly optimistic about the banking industry over the past year,” said Rose.

The main catalysts include improving credit, accelerating the pace of mergers and acquisitions, higher interest rates and a return to loan growth.

In total, 77 of the 139 banks covered by Raymond James are rated as strong or outperforming buyers.

“We are seeing similar catalysts for the industry in 2022 as we did in 2021 which we believe will likely lead to positive BPA revisions throughout 2022,” Rose said.

Net interest margins are expected to increase as banks deploy excess liquidity and demand from commercial and industrial borrowers improves.

See also: Why the recent wave of regional bank mergers is far from over – and you could benefit from it

Raymond James improved CrossFirst Bankshares CFB,
+ 3.52%
to buy solidly to outperform, with a target price of $ 18 per share.

“Loan growth will be supported by continued recruitment efforts across its footprint, its recent entry into Phoenix and the deepening of its presence in Texas, which we believe will support single-digit loan growth through 2023. “Rose said. “In addition, we see the recent appointment of Ben Clouse as CFO as an additional positive given his experience in a larger company (former CFO of Waddell & Reed Financial Inc.”

SouthState Corp. SSB,
+ 0.15%
and Atlantic Capital Bancshares Inc. ACBI,
+ 0.18%
were revalued to outperform market performance, before the merger of the two banks which should be finalized by the end of the first quarter. Raymond James has set a price target of $ 90 for SouthState.

Positive winds from SouthState include its “solid” loan growth potential in mid to high numbers, the benefits of its June merger with CenterState Bank and a boost from its ongoing acquisition of Atlantic Capital Bancshares, a- he declared.

Read: Mid-cap banks are healthy but see downward pressure on overdraft fees and increased regulatory oversight

On the negative side, Raymond James downgraded Prosperity Bancshares Inc. PB,
for the market to perform to outperform. “We see few material catalysts to improve its relative valuation against its peers in the near term,” Rose said.

Raymond James’ rating changes come after a strong year for bank stocks, with the KBW Nasdaq Bank Index BKX,
+ 1.11%
up 36% in 2021, including Thursday’s gains.

Read: Mid-cap banks are healthy but see downward pressure on overdraft fees and increased regulatory oversight

CrossFirst Bankshares stock gained 41% in 2021, including a nearly 5% jump on Thursday. SouthState is up about 11% this year, including a 2% rise on Thursday. Prosperity Bancshares rose 4.3% this year.

See also: UBS names Bank of America as first choice in glowing outlook for banking stocks

Comments are closed.