Stephens has increased the price target on Banc of California (NYSE: NYSE:BANC) to $16.00, up from the previous $15.00, while maintaining an Equal Weight rating on the stock.
The adjustment follows the bank's third-quarter results, which included an operational earnings per share (EPS) of $0.21, surpassing the analyst's estimate of $0.16.
The report highlighted a 7.9% increase in pre-provision net revenue (PPNR) compared to the forecast.
The recent quarter demonstrated significant balance sheet repositioning efforts by Banc of California. These efforts have led to the company exceeding and raising its prior fourth-quarter 2024 net interest margin (NIM) expectations.
Moreover, Banc of California has met its fourth-quarter expense target ahead of schedule, now anticipating to reach the low end of its guidance in the fourth quarter.
Stephens estimates remain mostly unchanged post-quarter, noting that his forecasts had already accounted for better-than-guided levels of NIM and expenses.
Looking forward, continued NIM expansion into 2025 is expected, along with modest reductions in expenses, primarily driven by ECR cost relief. It is noted that the majority of cost savings are already reflected in the bank's current run rate.
In other recent news, Banc of California reported mixed results for its third-quarter earnings. Despite a net loss of $0.01 per share due to securities repositioning, the bank's adjusted earnings per share rose to $0.25, and the net interest income stood at $232 million. The bank also reported an increase in loan balances by $300 million and a rise in new loan production yields to 8.29%.
Among the recent developments, Banc of California sold $1.95 billion in CIVIC loans and repositioned $740 million in securities to improve yield, which is expected to trend higher, between 3.00% and 3.10% in the fourth quarter. The bank also plans to expand its lender finance and warehouse lending businesses, with projections of expanding the warehouse business from $1.2 billion to potentially $2 billion.
Management anticipates further reductions in non-interest expenses due to system conversions and headcount adjustments. Despite a slight net loss per share this quarter, Banc of California remains optimistic about future growth and margin expansion.
InvestingPro Insights
Banc of California's recent financial performance aligns with several InvestingPro Tips and metrics. Despite the challenges reflected in its negative earnings per share, InvestingPro data shows a strong 3-month price total return of 18.9%, indicating investor confidence in the bank's turnaround efforts. This positive momentum is further supported by the stock trading near its 52-week high, with a price at 97.45% of its 52-week peak.
InvestingPro Tips suggest that analysts anticipate sales growth and profitability for Banc of California in the current year, which corroborates the analyst's positive outlook on the bank's net interest margin expansion and expense reduction efforts. The bank's price-to-book ratio of 0.86 also aligns with the analyst's valuation assessment of 0.97 times tangible book value.
For investors seeking a deeper understanding of Banc of California's prospects, InvestingPro offers 7 additional tips, providing a comprehensive view of the company's financial health and market position.
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