On Monday, Customers Bancorp (NYSE:) saw its stock price target lowered by Piper Sandler from $61.00 to $55.00, while the firm kept a Neutral stance on the stock. The adjustment followed the company’s third-quarter earnings report, which revealed an earnings per share (EPS) of $1.31.
Adjustments for non-recurring items, including severance costs, suggested a core EPS of $1.34, falling short of Piper Sandler’s estimate of $1.48 and the consensus of $1.43.
The quarter was marked by several complexities, notably a $0.35 shortfall in net interest income (NII), which was somewhat mitigated by a $0.17 surplus on provisioning. Despite these challenges, the bank maintained its growth trajectory. However, the net interest margin (NIM) was reported at 3.06%, which is 23 basis points lower than the previous quarter.
Management indicated on the earnings call that there remains a pathway to achieving 30% EPS growth in 2025, based on a lower starting point. Piper Sandler expressed skepticism regarding this outlook, citing the new NIM benchmark and increased expenses as reasons for tempering expectations.
The firm noted that Customers Bancorp’s capital levels remained above the target and that credit quality was stable. The subdued market reaction to the earnings report was attributed to the stock’s valuation being below the tangible book value per share (TBVPS), which may provide some downside protection for investors.
In other recent news, Customers Bancorp has been the subject of an analyst rating adjustment by DA Davidson. The firm lowered its target price from $65 to $60, while maintaining a Buy rating. This change was primarily due to a reduced net interest income forecast, now expected to be $679 million, down from the earlier projection of $737 million. DA Davidson also lowered its 2025 earnings per share estimate for Customers Bancorp to $5.82 from $7.24.
Simultaneously, Customers Bancorp has reported a strategic shift towards becoming a specialized commercial bank. The bank’s core earnings per share stood at $1.34, with a net income of $43.8 million and a 16% annualized loan growth. The venture banking segment of Customers Bancorp has experienced significant expansion, maintaining a robust credit quality with an NPA ratio of 22 basis points.
These recent developments underscore Customers Bancorp’s strategic vision for the future. The bank’s transformation strategy is expected to be completed by mid to late 2025. However, elevated compliance and technology expenses are expected to impact non-interest expenses in Q4.
InvestingPro Insights
Recent data from InvestingPro adds context to Customers Bancorp’s financial situation. The company’s P/E ratio stands at 7.42, indicating that it’s trading at a relatively low earnings multiple. This aligns with the article’s mention of the stock’s valuation being below the tangible book value per share, potentially offering downside protection for investors.
InvestingPro Tips highlight that Customers Bancorp has been profitable over the last twelve months, with a strong return over the last five years. However, it’s worth noting that analysts expect net income to drop this year, which could explain Piper Sandler’s skepticism about the company’s 30% EPS growth target for 2025.
The stock’s recent performance has been volatile, with a significant price drop of 20.56% over the last three months. This volatility reflects the challenges mentioned in the article, such as the shortfall in net interest income and the lower net interest margin.
For investors seeking a more comprehensive analysis, InvestingPro offers 10 additional tips for Customers Bancorp, providing a deeper understanding of the company’s financial health and market position.
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