Mid-cap banks are largely expected to benefit from fixed-asset repricing over the next 12 to 15 months, supporting continued earnings growth, with investors increasingly rewarding sustainable earnings improvement over quarterly beats, BofA Securities said in a Wednesday note.
In Q3, 70% of mid-cap banks beat earnings per share estimates, with 56% due to revenue, 59% on expenses, and 65% on lower credit costs, analysts said.
Popular (BPOP) and Columbia Banking System (COLB) are BofA's top picks as they have visible net interest margin support at attractive valuations.
Analysts said Texas Capital Bancshares (TCBI) was the "clearest winner" of the earnings cycle, adding that Central Bancompany (CBC) and Prosperity Bancshares (PB) shares outperformed amid increased confidence in repricing, cost savings, and forward earnings visibility.
BofA increased Central Bancompany's price objective to $36.50 from $33, Prosperity Bancshares' to $82 from $79, and Washington Trust Bancorp's (WASH) to $37 from $36. It lowered Associated Banc-Corp's (ASB) price objective to $32 from $34 and Commerce Bancshares' (CBSH) to $68 from $71.
Price: 158.63, Change: +1.85, Percent Change: +1.18
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