On Friday, Piper Sandler reaffirmed its Overweight rating on shares of Provident Financial Services (NYSE:NYSE:PFS), with a steady price target of $19.00. The endorsement comes after a series of investor Zoom (NASDAQ:ZM) calls earlier in the week with the management of Provident Financial Services. During these discussions, management conveyed optimism about the recent merger with Lakeland Bancorp (NASDAQ:LBAI), noting that the extended 17-month period before closing allowed for meticulous integration planning, which is anticipated to facilitate a smooth transition.
The company indicated that the projected cost savings from the merger, initially estimated at 35% of Lakeland's expenses, might be exceeded. Additionally, the anticipated deal charges, which were initially forecasted at $95 million, are also expected to be lower than first thought. Provident Financial Services is on track to complete the systems conversion by Labor Day weekend and has plans to consolidate 22 branch locations by the end of August.
The management has not finalized the deal-related interest rate marks, but they do not foresee significant deviations from the $543 million figure provided during the recent subordinated debt offering. About half of the earnings accretion related to these interest rate marks is expected to be realized over the first three years following the merger.
Provident Financial Services is also prioritizing cultural integration within the newly merged entity, a move that is being spearheaded by the CEO. The focus on cultural integration is a critical component of the merger process, ensuring that the combined workforce aligns with the company's values and goals. This attention to cultural synergy is seen as a vital element in the overall success of the Provident Financial and Lakeland Bancorp merger.
In other recent news, Provident Financial Services, Inc. has reported a strong first quarter with earnings of $0.43 per share. The company is also set to finalize a strategic merger with Lakeland Bancorp following all necessary regulatory approvals. This merger is projected to enhance Provident Financial's net interest margin, return on assets, and return on tangible equity by 2025. The company is focusing on deposit growth and operational synergies post-merger, with an estimated net interest margin for the combined entity around 3.25%.
Provident Financial is also anticipating a return to the normal pull-through rate of 50-60% in the future. Despite experiencing $83 million in net outflows by the end of the quarter, the company's fee-based businesses, particularly insurance and wealth management, have shown strong performance.
InvestingPro Insights
Provident Financial Services (NYSE:PFS) shows a mix of financial strength and challenges as per the latest real-time data from InvestingPro. With a market capitalization of $1020M and a robust operating income margin of 41.82% over the last twelve months as of Q1 2024, the company demonstrates significant operational efficiency. Additionally, the P/E ratio stands at a reasonable 8.42, with a slight adjustment to 8.05 for the same period, indicating a potentially undervalued stock relative to earnings.
InvestingPro Tips highlight that Provident Financial Services has been a consistent dividend payer, having maintained payments for 22 consecutive years, which is an attractive feature for income-focused investors, especially with a current dividend yield of 7.13%. On the cautionary side, the company has seen its stock price struggle recently, trading near its 52-week low and experiencing a 15.61% drop in the last month. Analysts have also revised their earnings downwards for the upcoming period, suggesting potential concerns about future profitability, despite the company being profitable over the last twelve months.
For those interested in a deeper analysis, there are additional tips available on InvestingPro, which can be accessed with a special offer. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking further insights that could inform investment decisions regarding Provident Financial Services.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.