Capital One
Capital One also had an unchanged risk assessment of Higher, and the price target of $145 was unchanged as well. The stock trades at around 1.1 times tangible book value, below the median of 1.65 for large-cap banks “despite COF’s better relative returns.”
The analysts also noted that “loan growth trends are solid, COF is well positioned to continue generating capital, and management can likely pull back on marketing if needed.” Key risks include worse-than-expected consumer credit losses caused by falling unemployment claims or higher credit card delinquencies.
At Thursday’s closing price of $102.11, the implied upside on the stock is 42.0%. For the year to date, shares are down about 29%.
Fifth Third Bank
Fifth Third Bank’s risk assessment was unchanged at Higher, and the price target of $44 was also unchanged. The bank has strong liquidity positions and leverage to higher rates and is trading at discounts to longer-term medians on pre-provision net revenue, price to sales ratio, P/E ratio and capitalization to assets ratio.
The analysts also noted, “FITB is now trading nearly ~25% below its long term median [pre-provision net revenue] valuation and slightly below its post-crisis median.” Risks for the bank include negative operating leverage, slowing loan growth and net interest margin compression represent key risks for shares.
At Thursday’s closing price of $33.25, the upside potential based on Baird’s price target is 32.3%. For the year to date, the bank’s stock has dropped about 23.2%.
M&T Bank
The risk assessment on M&T Bank remained at Average. Baird raised its $175 price target to $200. The analysts said the new price target assumes shares trade near 2.15 times the second 12-month period’s tangible book value. That level is below the stock’s post-crisis median level of about 2.3 times given lower returns in the current operating environment.
Key risks to Baird’s valuation are decelerating loan growth, net interest margin compression and integration issues stemming from its recently completed $8.3 billion merger with People’s United.
At Thursday’s closing price of $160.64, the upside potential based on Baird’s new price target is 24.5%. M&T’s stock has added 6% to its share price so far in 2022.
Originally posted at 24/7 Wall St.
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