On Wednesday, Piper Sandler increased the stock price target for Byline Bancorp (NYSE:NYSE:BY), a financial institution, from $27.00 to $34.00, while maintaining an Overweight rating on the company's stock. This adjustment reflects the analyst's view of the company's solid performance in the second quarter and its prospects for growth.
The second quarter results for Byline Bancorp showed a 3% positive pre-provision net revenue (PPNR) surprise, driven by higher net interest income (NII) due to robust loan growth and more resilient net interest margin (NIM). The firm's Overweight rating is reaffirmed based on Byline Bancorp's potential for multiple expansion above its peers, expected stable future credit metrics, and a profitability profile that stands above average.
Byline Bancorp has been recognized for its high-quality organic balance sheet growth, which is largely attributed to market share gains following several production-related hires in recent years. The company's growing excess capital flexibility is also seen as a positive, as it could lead to increased returns for shareholders or be used for mergers and acquisitions that are well-received by the market.
Piper Sandler has adjusted its 2024 estimated operating earnings per share (EPS) for Byline Bancorp to $2.70, which is a 2% increase, mainly due to the positive results in the second quarter. The firm's 2025 estimated EPS remains unchanged at $2.55.
The new price target of $34.00 is based on a 13.5 times multiple of the estimated 2025 earnings, which is a 3.0 times increase over the higher peer multiples. This premium is justified by Byline Bancorp's superior profitability outlook, with an estimated return on assets (ROA) of 1.2% in the second half of 2024 and into 2025, and the company's scarcity value in the Chicago market.
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