Equity analyst firm Sterne Agee published a new Industry Report on Tuesday, September 30th. The report, authored by SA analysts and Brett Rabatin and Nathan Race, highlights banks where SA’s fiscal year 2015 estimates are significantly different from the analyst consensus estimates.
Rabatin and Race summarize their perspective in the introduction to the report. “Names we think will have better than expected loan growth, particularly in 3Q14. While asset sensitivity is a current focus, growth and/or differentiated strategies may fair better as we head into 4Q14. Names of positive focus – East West Bancorp, Inc. (NASDAQ:EWBC), Prosperity Bancshares, Inc. (NYSE:PB), Popular Inc (NASDAQ:BPOP), and Umpqua Holdings Corp (NASDAQ:UMPQ).”
FY 2015 bank EPS estimates
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Exhibit 1 above highlights that SA fiscal year 2015 estimates are above consensus on a number of bank stocks. Rabatin and Race point in particular to Texas-based Popular Inc (NASDAQ:BPOP) and a few names on the west coast including East West Bancorp, Inc. (NASDAQ:EWBC) and Umpqua Holdings Corp (NASDAQ:UMPQ). The analysts argue that these firms are likely to have better profitability than consensus expectations over the next 12 months. Sterne Agee FY 2015 estimates are also above consensus on BOK Financial Corporation (NASDAQ:BOKF) (+3.5%) and Columbia Banking System Inc (NASDAQ:COLB) (+5.1).
Of note, bank stocks with fiscal year 2015 SA estimates below analyst consensus include Texas Capital Bancshares Inc (NASDAQ:TCBI) (-4.6%), Independent Bank Group Inc (NASDAQ:IBTX) (-4.8%) and Washington Federal Inc. (NASDAQ:WAFD) (-4.5%).
Bank EPS estimates: Texas loan growth likely to surprise on upside
Rabatin and Race are enthused about the potential for loan growth to surprise on the upside at a number of Texas banks. They note in their report: “While we are not above consensus next year on some other Texas names following several trips to the state this quarter, we believe loan growth will be better than expected overall for the state, with Hilltop Holdings Inc. (NYSE:HTH) being the possible exception. In particular Independent Bank Group Inc (NASDAQ:IBTX), ViewPoint Financial Group (NASDAQ:VPFG), and Texas Capital Bancshares Inc (NASDAQ:TCBI) are likely to have better growth than many appear to be modeling.”
The SA analysts also note, however, that accurately anticipating loan growth, and the resultant increase in net interest income, is complex given the wide variation in analyst modeling methodologies.