Raymond James Maintains Outperform rating On United Community (NASDAQ:UCBI), Price Target Revised To $21

122

Raymond James, Inc. has maintained an “Outperform” rating on United Community Banks, Inc. (NASDAQ:UCBI). Reaffirming its confidence in the prospects of United Community, Raymond reported that 4Q15 results were in line with their forecast. UCBI reported earnings per share of $0.33 for the quarter, which aligned with its estimated range of $0.31 to $0.35 EPS forecast.

However, Raymond James did slash its price target to $21 from $23 which indicates decreased bank equity valuations after the recent week’s corrections. Net interest margin, credit metrics and related costs also did better than expected and the deposit mix of the bank also saw relative improvement.

Growth in loan portfolio

Net loans saw growth of $162 million for the quarter to $590 million. Net interest margin saw 3.34% growth at 8bps, which was above the estimates driven by fee income growth led by investment in mortgage, advisory services, and SBA lending capabilities.

UCBI’s management has raised its estimates to cross the $10 billion assets mark in FY2016, which if successful, will result in $8-$10 million growth every year. Last quarter, UCBI sold its healthcare portfolio that included $190 million in loans. The sale closed in Q4 and the capital was invested in the securities segment.

In 2016, the company is estimating a single digit growth rate in the loan portfolio. A new loan production office was also opened by the bank in Charleston, South Carolina which saw new loan production of $28 million in 4Q15.

Positive Estimates for 2016 and 2017

Raymond James also set an EPS estimate at $1.40 for 2016 and $1.58 for 2017, which remains unchanged due to improved performance of the bank. The risk/reward scenario of the bank continues to get a positive outlook from the firm and valuation discounts to rivals are estimated to shrink if its growth strategy continues and the bank is able to reach the 1.1% ROA by 2016 end.

An ad to help with our costs