IBTX - Independent Bank Group cut to Neutral as Piper sees earnings power headwinds
2023-07-26 10:33:17 ET
Piper Sandler downgraded Independent Bank Group ( NASDAQ: IBTX ) stock to Neutral from Overweight on Wednesday as the regional lender's liability-sensitive balance sheet struggles with higher interest rates.
"Though IBTX remains a high-quality, disciplined bank in strong TX markets, we think the Neutral rating is appropriate given the near-term earnings power headwinds," analyst Stephen Scouten wrote in a note.
The bearish coverage came a couple days after Independent Bank ( IBTX ) turned in worse-than-expected earnings for the second quarter that reflected sequential and Y/Y declines in net interest income due to higher funding costs on deposit products.
The increased funding costs took its toll on the cost of interest-bearing liabilities (including borrowings), climbing to 3.37% in Q2 from 2.63% in Q1 and 0.50% in Q2 2022.
"Given the difficult rate/funding environment, we think that NIM/NII trends will remain pressured over the next year as rates stabilize," Scouten contended, noting downside could be limited given the company's solid liquidity, capital and asset quality.
IBTX, meantime, drifted up 1.8% in Wednesday morning trading.
The Neutral rating falls between the SA Quant system rating of Sell and the average sell-side analyst rating of Buy.
More on Independent Bank Group:
- Independent Bank Group: Growth Hampered, Sustainability Unperturbed
- Independent Bank Group Working Through A Challenging Bottleneck
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Independent Bank Group cut to Neutral as Piper sees earnings power headwinds