OCFC - OceanFirst Financial At Risk Of Treading Water Without Competitive Differentiation
2024-07-02 15:54:13 ET
Summary
- OceanFirst lacks many of the frequent drivers of bank stock outperformance, including mid-to-high single-digit revenue and book value growth, double-digit ROE, and strong customer satisfaction scores.
- Despite improving loan yields, OceanFirst continues to struggle with spread pressure from higher funding costs, as the bank lacks a truly attractive core deposit franchise.
- Credit risk seems contained, but the size of the office and multifamily portfolios make them a "watch item" even with OceanFirst's excellent credit quality history.
- OceanFirst can certainly expect to benefit from a Fed rate cut cycle, and double-digit earnings growth in FY'25/'26 seems plausible, but it's hard to argue for differentiation or a sustainable bull thesis here.
There are no sure things with any investment approach, but generally speaking bank stocks tend to outperform when the company behind them can sustainably generate multiyear revenue per share and tangible book value per share growth in the high single-digits, healthy ROE, and strong customer satisfaction scores (measured by metrics like J.D. Power’s Net Promoter Score)....
OceanFirst Financial At Risk Of Treading Water Without Competitive Differentiation