Analyst note

Tupelo, Miss.-based Renasant Corp.'s acquisition of Republic Business Credit, formally known as Continental Republic Capital LLC, is a sign of Renasant management's willingness to engage in M&A to support the company's softening loan pipeline, according to Raymond James analyst Michael Rose.

The all-cash transaction was effective Dec. 30, 2022. It marks Renasant's second acquisition of an asset-based lending company "in as many years," the analyst said.

Rose also noted the defensive characteristics of asset-based lending loans that could restrict any potential charge-offs arising in a challenging credit cycle through asset forfeiture.

Upgrade

Wolfe Research analyst Steven Chubak upgraded Bank of New York Mellon Corp. to "outperform" from "peer perform."

The company is poised for a strong 2023 considering distinct net interest income tailwinds, self-help levers and limited credit exposure, according to the analyst.

For Bank of New York Mellon, Chubak's price target is $60, 2023 EPS estimate is $5.06 and 2024 EPS estimate is $5.58.

Downgrades

Wolfe Research's Chubak downgraded Morgan Stanley to "underperform" from "outperform" and Goldman Sachs Group Inc. to "peer perform" from "outperform," saying the companies have some of the lowest upsides among the global systemically important banks, or G-SIBs, under his current valuation framework.

"[W]e see a number of risks emerging given elevated market sensitivity, capital markets headwinds, and higher capital under [Basel IV]," the analyst wrote.

Chubak also sees additional risks for Morgan Stanley, including slower net new asset trends, peak net interest income concerns and less compelling valuation compared to G-SIB or retail peers.

For Morgan Stanley, Chubak's price target is $92, 2023 EPS estimate is $6.34 and 2024 EPS estimate is $8.13.

For Goldman Sachs, the analyst's price target is $388, 2023 EPS estimate is $29.86 and 2024 EPS estimate is $43.90.

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Hovde Group analyst Brett Rabatin downgraded Helena, Mont.-based Eagle Bancorp Montana Inc., Hattiesburg, Miss.-based First Bancshares Inc., Denver-based First Western Financial Inc. and Knoxville, Tenn.-based SmartFinancial Inc. to "market perform" from "outperform."

The ratings changes were due to the analyst's "refreshed look at potential [net interest margins] and possible catalysts for relative performance next year."

Eagle Bancorp shares did not perform well compared to peers in 2022, according to Rabatin. The analyst said he is concerned about the possibility of continued low profitability leading the shares to stay as a "value trap" in the next few quarters.

For Eagle Bancorp, Rabatin lowered his price target to $18 from $23, 2023 EPS estimate to $1.83 from $2.09 and 2024 EPS estimate to $2.28 from $2.58.

Near-term prospects at First Bancshares are lower because of deposit repricing volatility, loan prepayments decreasing net interest income and a more liability-sensitive balance sheet likely moderating EPS and profitability gains, Rabatin said. The company's recently completed acquisition of Heritage Southeast Bancorp. Inc. will also likely add noise and expense levels in the next two quarters, according to the analyst.

For First Bancshares, Rabatin decreased his price target to $35 from $38, 2023 EPS estimate to $3.29 from $3.49 and 2024 EPS estimate to $3.54 from $3.81.

First Western's balance sheet could be more susceptible to deposit cost hikes in the near term versus peers, according to Rabatin. At the company, catalysts are more limited in the near term absent a purchase of a community bank with a core-funded, liquid balance sheet, the analyst said.

For First Western, Rabatin changed his price target to $30 from $33, 2023 EPS estimate to $2.53 from $2.70 and 2024 EPS estimate to $2.87 from $3.04.

Rabatin said he likes the substantial progress at SmartFinancial but sees more downside risk to expectations in the near term, limiting outperformance catalysts compared to the broader community bank space.

For SmartFinancial, Rabatin modified his price target to $31 from $34.50, 2023 EPS estimate to $2.75 from $2.96 and 2024 EPS estimate to $2.84 from $3.28.