On Tuesday, Amalgamated Bank (NASDAQ:AMAL) stock received a positive evaluation from a JPMorgan (NYSE:JPM) analyst, with a price target increase to $31.50 from $29.50. The bank's Overweight rating remains unchanged.
This adjustment comes after Amalgamated Bank reported a strong first quarter for the year 2024, with core earnings per share (EPS) of $0.83, surpassing expectations. The favorable results were attributed to a lower provision and pre-tax, pre-provision (PTPP) income slightly above initial forecasts.
The bank's quarter was marked by significant deposit growth that exceeded projections, as well as an improved outlook for net interest income (NII) and PTPP income for 2024.
A notable development for the quarter was the substantial influx of political deposits, which reached approximately $1.5 billion in April. This surge in deposits enabled the bank to reduce its higher-cost borrowings and brokered certificates of deposit (CDs) by around $250 million.
Amalgamated has traditionally relied on Federal Home Loan Bank (FHLB) borrowings to offset the outflow of political deposits, which are expected to occur later in the second and third quarters of 2024 as political campaign spending increases.
However, this year, the bank anticipates less dependence on wholesale funding due to robust growth in political and other niche deposit areas such as social advocacy, unions, and nonprofits.
Despite an anticipated net interest margin (NIM) decline in the fourth quarter of 2024, JPMorgan expects the NIM to remain stable or improve for the remainder of the year and into 2025. This is supported by the bank's fixed asset repricing benefits. Additionally, Amalgamated's balance sheet growth is projected to outpace its peers, potentially leading to superior top and bottom-line growth for 2024.
Credit trends within Amalgamated's multifamily portfolio remain stable, with no non-performing or past-due loans and a multifamily loan portfolio that is well-positioned in terms of loan-to-value (LTV) ratios and debt service coverage ratios (DSCRs).
Loans that matured in the first quarter were rolled over without significant concessions, mitigating concerns over potential credit issues within the bank's rent-regulated multifamily portfolio.
In terms of valuation, Amalgamated's shares are trading at an implied cost of equity of 14% for 2024, compared to an 11% average for its peers. The bank is positioned to leverage its niche market and drive key growth metrics, which could narrow the current valuation discount, according to the JPMorgan analysis. The Overweight rating is maintained as a reflection of this potential.
InvestingPro Insights
Following the positive assessment by JPMorgan, current metrics from InvestingPro provide a broader perspective on Amalgamated Bank's financial health. The bank's market capitalization stands at $742.01 million, and it boasts a P/E ratio of 7.93, which is indicative of its earnings relative to its share price. Notably, the bank has experienced a significant 52.53% return over the last year, underscoring the strong performance highlighted by analysts. In addition to the solid earnings per share (EPS) reported for the last twelve months, Amalgamated Bank has shown an impressive 34.55% price uptick over the last six months, suggesting a robust growth trajectory.
InvestingPro Tips reveal that analysts have revised their earnings upwards for the upcoming period, reflecting optimism in the bank's future profitability. Moreover, while the bank suffers from weak gross profit margins, analysts predict it will be profitable this year, a sentiment supported by its profitability over the last twelve months. For readers looking to delve deeper into Amalgamated Bank's potential, there are additional InvestingPro Tips available, offering a comprehensive analysis of the company's prospects. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription and access these valuable insights.
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