Today, the 10-year Treasury yield surged to its highest level since May 2019 as investors weighed Federal Reserve Governor Lael Brainard’s comments on the Fed's need to drive down inflation quickly. The rise in Treasury yields bodes well for the banking sector since banks generate a significant portion of their revenue from net interest income (NII).
In addition, a surge in cash deposits since the onset of the COVID-19 pandemic has also helped the banking sector regain momentum. And rapid digitization by banks to improve their operating efficiency is expected to aid the industry’s long-term growth.
Therefore, Wall Street Analysts expect the stocks of fundamentally sound regional banks Signature Bank (SBNY), Western Alliance Bancorporation (WAL), and Customers Bancorp, Inc. (CUBI) to witness substantial gains in the coming months.
Signature Bank (SBNY)
New York City-based SBNY provides commercial banking products, services, and accepts various deposit products, including checking accounts, money market accounts, escrow deposit accounts, cash concentration accounts, certificates of deposit, and other cash management products. The company offers various lending products that comprise commercial and industrial loans, real estate loans, and letters of credit.
SBNY's total interest income increased 24.1% year-over-year to $606.31 million for the fourth quarter, ending Dec. 31, 2021. Its net income increased 51.9% from its year-ago value to $262.87 million. The company's EPS rose 33.1% from its prior-year quarter to $4.34. And its total cash and cash equivalents stood at $29.62 billion for its fiscal year ending Dec.31, 2021.
Analysts expect SBNY's revenue to increase 38.2% year-over-year to $607.16 million for the first quarter, ending March 31, 2022. The $4.28 consensus EPS estimate for the first quarter, ending March 31, 2022, represents a 32% improvement year-over-year. Also, it has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 28.5% in price over the past year and 16.5% over the past nine months.
All the 14 Wall Street Analysts that rated the stock rated it Buy. Closing its last trading session at $282.67, the 12-month median price target of $432.00 indicates a 52.8% potential upside. The price targets range from a low of $375.00 to a high of $472.00.
Western Alliance Bancorporation (WAL)
WAL in Phoenix, Ariz., is the bank holding company for Western Alliance Bank, which provides various banking products and related services, primarily in Arizona, California, and Nevada. It operates in Commercial; Consumer-Related; and Corporate & Other segments. The company offers deposit products, fixed-rate and fixed maturity certificates of deposit accounts, and treasury management and residential mortgage products and services.
For the fourth quarter, ended Dec. 31, 2021, WAL's net revenue increased 65.7% year-over-year to $561.00 million. Its net income increased 27.1% from its year-ago value to $246.00 million, while its adjusted EPS increased 21.2% from its prior-year quarter to $2.34.
The $2.08 consensus EPS estimate for the first quarter, ending March 31, 2022, represents a 9.6% improvement year-over-year. Analysts expect its revenue to increase 61.7% year-over-year to $544.81 million for the first quarter, ending March 31, 2022. In addition, it has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
The six Wall Street Analysts that rated the stock rated it Buy. The 12-month median price target of $127.67 indicates a 63.4% potential upside. The price target ranges from a low of $115.00 to a high of $139.00. The stock closed its last trading session at $78.14.
Customers Bancorp, Inc. (CUBI)
CUBI functions as the bank holding company for Customers Bank that offers financial products and services to individual consumers and small and middle-market businesses. The Wyomissing, Pa., company offers deposit products, including checking, savings, MMDA, and other deposit accounts.
During the fourth quarter, ended Dec. 31, 2021, CUBI's total interest income increased 39.8% year-over-year to $214.04 million. Its core earnings (a non-GAAP measure) increased 83.4% from its year-ago value to $100.10 million, while its core EPS grew 70.8% from its prior-year quarter to $2.92.
Analysts expect CUBI's revenue to increase 14.8% year-over-year to $152.40 million in the first quarter (ending March 31, 2022). Also, the company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters. The stock has gained 56% in price over the past year and 26.9% over the past nine months.
Among the five Wall Street Analysts that rated the stock, four rated it Buy, and one rated it Hold. Closing its last trading session at $48.6, the 12-month median price target of $76.30 indicates a 57% potential upside. The price targets range from a low of $62.50 to a high of $85.00.
SBNY shares were trading at $275.00 per share on Wednesday afternoon, down $7.67 (-2.71%). Year-to-date, SBNY has declined -14.83%, versus a -5.96% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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