Regional banks continued to be among the least-expensive US bank stocks by price-to-estimated 2023 earnings per share as of mid-July, with Western Alliance Bancorp. atop the list for the second consecutive time.
Cheaply valued bank stocks
Through July 14, Western Alliance recorded the lowest price-to-estimated EPS multiple, at 4.9x, according to an S&P Global Market Intelligence analysis. The industry median for the 154 banks included in this analysis was 8.5x.
Western Alliance's stock suffered after the recent bank failures, due to misunderstood uninsured deposits and technology sector exposure, Deutsche Bank Securities analyst Bernard von-Gizycki said. The analyst initiated coverage of the company June 27 with a "hold" rating, a price target of $41 and a 2023 EPS estimate of $7.29.
"[Management] has done a good job on restoring [Western Alliance]'s status from the market perception of being one of the next banks to potentially have solvency issues after three midcap bank failures, to shifting focus to its go-forward/post-crisis strategy, in our view," the analyst wrote in a note.
Western Alliance's stock has "recovered nicely" from its May 4 lows, but "from here, the repositioning of the balance sheet will likely result in an ongoing drag to earnings for both this year and next," von-Gizycki said.
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Other companies with over $10 billion in assets on the least expensive list included Customers Bancorp Inc., Comerica Inc., Columbia Banking System Inc., Zions Bancorp. NA and Citizens Financial Group Inc. Customers Bancorp traded at 6.0x its estimated EPS, Comerica at 6.1x, Columbia Banking System at 6.2x, Zions at 6.3x and Citizens at 6.7x.
Warsaw, NY-based Financial Institutions Inc. took the second spot with a price-to-estimated EPS multiple of 5.4x, followed by Sandusky, Ohio-based Civista Bancshares Inc. and Los Angeles-based RBB Bancorp, with both trading at 5.7x estimated EPS.
Richly valued bank stocks
Dallas-based Triumph Financial Inc. was the most-expensive US bank stock for the sixth consecutive month with a price-to-estimated EPS multiple of 36.3x.
Wilmington, NC-based Live Oak Bancshares Inc. ranked second as it traded at 20.4x its estimated EPS, and Abilene, Texas-based First Financial Bankshares Inc. was third with a multiple of 19.8x.
Total returns
Year to date through July 14, Western Alliance logged a return of negative 33.5%, while Triumph Financial booked a return of 34.1%. Among all the banks included in the analysis, Seattle-based HomeStreet Inc. recorded the lowest year-to-date return at negative 73.7%.
In the last 12 months, the S&P 500 returned 18.6% and the S&P US BMI Banks index returned negative 3.5%.
