On Monday, Customers Bancorp (NYSE:CUBI) received an updated price target from DA Davidson, with the firm setting a new target of $79, up from the previous $79. The Buy rating on the bank's shares remains unchanged. The revision comes after a notable uptick in the company's stock value, which has risen 55% since hitting a low point on June 10.
The financial institution has been recognized for several achievements that have contributed to a stronger balance sheet and the initial steps toward revamping its deposit franchise. Notably, its capital ratios are now at the higher end of its peer group, with a Common Equity Tier 1 (CET1) ratio at 12.8%, up from 9.6% in the first quarter of 2023, and a Tangible Common Equity (TCE) ratio at 7.7%, compared to 6.0% in the same quarter.
Customers Bancorp has also managed to grow its loan portfolio for the first time in five quarters, boasting strong pipelines and maintaining its end-of-period loan growth forecast between 10-15%. This is in contrast to many peers who have reduced their loan forecasts. The bank has decreased its reliance on high-cost borrowings and has seen growth in net interest income and margin in 2023, while also maintaining solid credit trends.
The bank's tangible book value (TBV) has shown impressive growth, more than doubling over five years at a compound annual growth rate (CAGR) of 15%, outpacing the regional bank peers' average of 4%. This growth continued with a 21% year-over-year increase in the second quarter of 2024. The April acquisition of 10 banking teams from the former Signature Bank (OTC:SBNY) is expected to further accelerate the transformation of the deposit franchise and help narrow the valuation gap.
DA Davidson justifies the raised price target by applying a conservative target price-to-earnings (P/E) multiple of 10.5 times their 2025 earnings per share (EPS) estimate. According to the firm, Customers Bancorp's current valuation is not considered high, trading at only 8.8 times the 2025 EPS forecast and a current 1.32 times price to tangible book value (P/TBV), compared to the Keefe, Bruyette & Woods Regional Banking Index (KRX) trading at 12.6 times 2025 EPS estimates and 1.76 times P/TBV.
In other recent news, Customers Bancorp has reported strong second-quarter results for the fiscal year 2024. The bank experienced an 11% annualized growth in loans and expanded its net interest margin by 19 basis points. The firm's tangible book value per share increased notably, surpassing $50 with a 13% annual growth in the first half of the year.
In addition to these developments, Customers Bancorp has authorized a share repurchase program for approximately 500,000 shares. The bank's future outlook includes maintaining liquidity levels between 25% to 30% and expects a relatively stable balance sheet in 2024. However, the bank anticipates reaching the higher end of its financial range by Q4 2024, with potential influences from hedging activities.
Customers Bancorp has also revealed a self-imposed limitation of around 15% on digital asset customer deposits. The bank's commercial real estate exposure is low, which is considered a competitive advantage. Lastly, the bank discussed its positioning and hedging strategies, with an emphasis on minimizing the impact of potential rate cuts on margins.
InvestingPro Insights
As Customers Bancorp (NYSE:CUBI) navigates a period of growth and transformation, real-time data and insights from InvestingPro provide a nuanced perspective on the bank's financial health and stock performance. With a market capitalization of $2.12 billion and a P/E ratio of 9.02, the bank trades at a low P/E ratio relative to near-term earnings growth, suggesting a potentially undervalued stock in comparison to its future earnings potential. This aligns with DA Davidson's analysis, which cites a conservative P/E multiple in their valuation.
InvestingPro Tips reveal that despite two analysts revising their earnings downwards for the upcoming period, the stock's return over the last week, month, three months, and year has been significant, with price total returns of 7.63%, 39.33%, 40.44%, and 59.97% respectively. This robust performance is also reflected in the stock trading near its 52-week high at 97.61% of this threshold. Moreover, the bank's strong revenue growth over the last twelve months, at 26.6%, indicates a healthy expansion that supports the positive outlook shared by DA Davidson.
For readers looking to delve deeper into Customers Bancorp's financials and stock performance, InvestingPro offers additional insights and metrics. There are 15 more InvestingPro Tips available that can provide a more comprehensive understanding of the bank's market position and future prospects. To access these insights, consider using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and enhance your investment strategy with valuable data-driven guidance.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.