On Monday (NASDAQ:MNDY), Stephens, a financial services firm, adjusted its stock price target for Customers Bancorp (NYSE: NYSE:CUBI), increasing it to $55.00 from the previous $53.00, while keeping an Equal Weight rating on the stock. This change comes after Customers Bancorp reported third-quarter earnings that surpassed expectations.
The company's operating earnings per share (EPS) reached $1.26, which was higher than Stephens' estimate of $1.20. The better-than-expected results were attributed to a lower provision for credit losses and a reduced tax rate.
Despite the positive earnings, Customers Bancorp experienced a quarter-over-quarter decline in net interest margin (NIM) of 23 basis points, which was attributed to a lower accretable yield and the sale of a consumer loan portfolio. Moreover, the company faced higher expenses due to increased salaries and benefits.
Following the earnings report, Stephens revised its operating EPS forecasts for the years 2024, 2025, and 2026. The adjustments reflect a less than 1% increase for 2024 to $5.46, a 9% decrease for 2025 to $5.00, and a 1% increase for 2026 to $7.40. These revisions were driven by lower NIM forecasts, anticipated higher near-term expenses, and reduced expectations for provisioning.
Customers Bancorp's deposit growth was notably strong, with new teams contributing to an increase of $1.1 billion in deposits during the quarter. However, the firm noted some areas of concern, including a recent regulatory written agreement, reliance on brokered deposits, and charge-off activities, which have led Stephens to maintain a cautious stance on the stock's rating.
In conclusion, Stephens has raised its price target on Customers Bancorp to $55, citing the company's third-quarter earnings performance, while continuing to monitor potential risks that may impact the stock's future rating.
In other recent news, Customers Bancorp has seen adjustments in its stock price target by both Piper Sandler and DA Davidson, following its third-quarter earnings report. The report revealed an earnings per share (EPS) of $1.31, with adjustments for non-recurring items suggesting a core EPS of $1.34. Piper Sandler lowered its target from $61.00 to $55.00, while DA Davidson reduced its target from $65.00 to $60.00. Both firms maintained their respective stances on the stock, Neutral and Buy.
The bank's third-quarter was marked by complexities, including a $0.35 shortfall in net interest income (NII), somewhat offset by a $0.17 surplus on provisioning. Despite these challenges, the bank reported a net income of $43.8 million and a 16% annualized loan growth, maintaining its growth trajectory. However, the net interest margin (NIM) was reported at 3.06%, which is 23 basis points lower than the previous quarter.
These developments come as Customers Bancorp continues its strategic shift towards becoming a specialized commercial bank. The bank's venture banking segment has experienced significant expansion, maintaining robust credit quality with an NPA ratio of 22 basis points. Amid these changes, elevated compliance and technology expenses are expected to impact non-interest expenses in Q4.
InvestingPro Insights
Recent data from InvestingPro adds depth to Stephens' analysis of Customers Bancorp (NYSE: CUBI). The company's market capitalization stands at $1.66 billion, with a P/E ratio of 8.25, indicating that the stock may be undervalued relative to its earnings. This aligns with Stephens' decision to raise the price target.
InvestingPro Tips highlight that CUBI has shown a significant return over the last week, with data confirming a 15.97% price total return in the past week. This recent performance, coupled with a strong 15.28% return over the last three months, suggests growing investor confidence in the stock, potentially influenced by the better-than-expected Q3 earnings reported in the article.
However, it's worth noting that InvestingPro Tips also indicate that 8 analysts have revised their earnings downwards for the upcoming period. This caution among analysts may explain Stephens' decision to maintain an Equal Weight rating despite raising the price target.
For investors seeking a more comprehensive analysis, InvestingPro offers 9 additional tips for CUBI, providing a deeper understanding of the company's financial health and market position.
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