On Friday, Jefferies updated its outlook on Customers Bancorp (NYSE:CUBI), raising the price target to $67 from the previous $57 while maintaining a Buy rating. The adjustment comes in response to the bank's recent activities, including the hiring of 10 new teams in the first quarter, which was more than anticipated.
The bank's management has disclosed that approximately $2 billion in deposit pipelines is expected to be added to the balance sheet over the next few quarters, thanks to these new teams. These deposits are anticipated to have a 30% demand deposit account (DDA) mix. This influx is projected to help alleviate the bank's relatively high deposit cost, which currently stands at 4.63%.
Despite these developments, the firm has revised its earnings per share (EPS) forecast for Customers Bancorp downward to $6.75 for 2024 and $8.45 for 2025, from the previous estimates of $7.40 and $8.85, respectively. The revision is attributed to the higher expenses incurred from the expansion of the workforce.
The report also highlighted Customers Bancorp's strong capital position, with a Common Equity Tier 1 (CET1) ratio at 12.8%. However, the bank's management is opting for a cautious approach and is not engaging in share buybacks in the near term. This conservative strategy is being adopted despite the robust capital levels, as management awaits a more stable macroeconomic environment and continued credit quality assurance.
The analyst noted that while the bank is holding off on share repurchases for now, it may consider this option in the future if the macroeconomic situation improves and credit quality remains stable.
In other recent news, Customers Bancorp has made significant strides in its financial performance. The company reported strong second-quarter results for fiscal year 2024, with an 11% annualized growth in loans and a 19 basis point expansion in net interest margin. The company's tangible book value per share also saw an impressive increase, surpassing $50 with a 13% annual growth in the first half of the year.
Keefe, Bruyette & Woods (KBW) and DA Davidson both raised their price targets on Customers Bancorp shares, maintaining their positive ratings. KBW highlighted the bank's significant loan growth and margin expansion, with capital levels exceeding targets. DA Davidson noted the bank's solid capital ratios and the growth of its loan portfolio.
In addition, KBW forecasts a 20% increase in earnings per share (EPS) and a return on tangible common equity (ROTCE) of 14.5% by the year 2025 for Customers Bancorp. The bank's future outlook includes maintaining liquidity levels between 25% to 30% and expects a relatively stable balance sheet in 2024. Lastly, Customers Bancorp has authorized a share repurchase program for approximately 500,000 shares, indicating confidence in its financial health.
InvestingPro Insights
Recent data from InvestingPro underscores the dynamic financial landscape that Customers Bancorp (NYSE:CUBI) is navigating. With a market capitalization of $1.84 billion, the company is trading at a P/E ratio of 7.84, which is lower than the adjusted P/E ratio over the last twelve months as of Q2 2024, reflecting a value of 7.32. This suggests that investors are paying less for each dollar of CUBI's earnings, potentially indicating an undervalued stock relative to its near-term earnings growth.
InvestingPro Tips highlight that while CUBI's stock price has experienced significant volatility, with a notable dip over the past week, the company has also demonstrated strong returns over the last month and three months, with increases of 22.09% and 27.24% respectively. This performance is particularly relevant for investors looking for growth in the short to medium term. Additionally, despite the concerns raised by analysts, who have revised their earnings predictions downwards, the company has been profitable over the last twelve months, and analysts predict profitability for this year as well.
For investors seeking more in-depth analysis, there are additional InvestingPro Tips available, which provide further insights into Customers Bancorp's financial health and future outlook. These tips can be accessed through the InvestingPro platform for those who are interested in a deeper dive into CUBI's investment potential.
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