On Wednesday, Piper Sandler reaffirmed its Neutral stance on shares of RBB Bancorp (NASDAQ: RBB), maintaining a $19.00 price target. The firm's analysis follows recent meetings with RBB's CEO David Morris and CFO Lynn Hopkins, which were positively received by investors.
Piper Sandler highlighted RBB's ongoing efforts to enhance profitability through organic balance sheet growth, which is expected to contribute to an uptick in Net Interest Income (NII) and Net Interest Margin (NIM) starting in the second quarter of 2024.
The bank is also anticipated to see a reduction in operating expenses following the expected removal of an Anti-Money Laundering/Counter-Financing of Terrorism (AML/CFT) consent order in either the second or third quarter of 2024. This development comes after RBB has addressed the necessary elements of the order.
Additionally, the bank is predicted to continue share buybacks due to its shares being undervalued at 0.8 times tangible book value (TBV). Moreover, there is potential for mergers and acquisitions, which is supported by RBB's significantly high excess Total Common Equity (TCE) of 11.6%.
Despite these positive developments, Piper Sandler remains neutral on RBB due to the bank's below-average profitability outlook, with a projected Return on Assets (ROA) of 0.7% for 2024 and 2025. The firm also cited limited visibility on catalysts that could close the profitability gap between RBB and its peers. Nevertheless, Piper Sandler considers RBB Bancorp to be an attractive long-term investment.
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