On Monday, Deutsche Bank (ETR:DBKGn) initiated coverage on First Citizens BancShares (NASDAQ:FCNCA) with a Buy rating, setting a price target of $2,600. Currently trading at $2,196, with a market capitalization of $30.4 billion, InvestingPro analysis suggests the stock is slightly undervalued. The recommendation is based on several key themes identified by the analyst that suggest a positive outlook for the bank's shares in the longer term.
The bank is anticipated to gain from a more favorable environment starting in 2025, which will likely be supported by deregulation efforts. This is one of the primary factors contributing to the Buy rating. The bank has demonstrated strong momentum, with a remarkable 55.37% year-to-date return. Additionally, First Citizens BancShares is expected to see growth in its SVB Commercial segment due to an increase in capital markets activity, which should stimulate loan growth following a period of sluggish performance.
Another point of strength for FCNCA is its robust capital levels, which are seen as supportive of strong share repurchases. This financial strength is coupled with the potential for shares to experience upside beyond the current net interest income assumptions, given the bank's asset sensitivity and the moderating assumptions on rate cuts.
Furthermore, the analyst highlights the bank's balance sheet flexibility, which is expected to enable it to effectively navigate various rate environments. This aspect of financial resilience adds to the positive outlook for First Citizens BancShares, as it prepares to capitalize on the anticipated economic changes in the coming years.
In other recent news, First Citizens BancShares reported strong third-quarter results for 2024, with an adjusted earnings per share of $45.87 and a resilient net interest margin of 3.53%. Despite a minor increase in deposits and a decrease in loans, the bank plans to maintain a solid capital ratio and continue share buybacks. Citi, in its recent analysis, maintained a neutral rating on First Citizens BancShares, updating its price target to $2,350 from the previous $2,100, based on revised cost of equity assumptions.
The bank's current valuation, according to Citi, is at a 9.7% premium, which, coupled with the stock's recent outperformance, prompts a cautious stance due to the limited upside potential. Looking ahead, First Citizens BancShares forecasts flat to low single-digit loan growth for the fourth quarter of 2024, with year-end loans expected to be in the $138 billion to $140 billion range, and deposits projected between $150 billion and $153 billion.
The bank also plans to submit a new capital plan in the first quarter of 2025, possibly leading to additional share repurchase authorization. These recent developments reflect First Citizens BancShares' strong financial performance and strategic initiatives, as the management remains optimistic focusing on capital allocation and maintaining a robust balance sheet.
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