COLB - Columbia Banking stock gaps up after boost to Outperform at KBW

2023-04-06 10:49:47 ET

Columbia Banking System ( NASDAQ: COLB ) stock climbed 6.4% in Thursday morning trading after KBW upgraded shares of the regional lender to Outperform from Market Perform due to greater balance sheet flexibility, above-average profitability and other bullish factors amid the fallout from three bank failures last month.

First off, the company has the fourth highest tangible book value per share among stocks in the KBW Nasdaq Regional Banking Index ( KRX ) at 45%, analyst Christopher McGratty pointed out in a note. New York Community Bancorp ( NYSE: NYCB ), which McGratty reiterated at Outperform, has a 53% TBV/share -- the second highest in KRX.

In referencing the firm's balance sheet flexibility, "because of the recentness and significance of mark-to-market of COLB and NYCB's balance sheet, both companies have optionality to proactively manage the balance sheet with little/no impact to capital/ earnings," the note said.

On the profitability front, the return on tangible common equity of the median bank in KRX ( KRX ) stood at 14%. That compares with COLB's 20.8% ROTCE and NYCB's 15.6% ratio in McGratty's revised 2024 estimates.

In turn, the analyst raised his 2023 EPS estimate for COLB to $4.20 from $3.75, "due to an adjustment to 1Q23 average fully diluted share count given the timing of the merger closer (end of February)." The revised estimate exceeds the Visible Alpha consensus of $3.71.

For NYCB, which acquired failed lender Signature Bank on March 19, McGratty also raised his 2023 EPS estimate to $1.22 from $1.15 vs. $1.26 consensus (12 analyst estimates).

Last month, Truist started coverage of COLB with a Hold rating on the basis of the stock nearing fair value.

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