On Tuesday, Stephens, a financial services firm, adjusted its outlook on Banc of California (NYSE: NYSE:BANC), reducing the price target to $15 from the previous $16. This change comes while the firm retains an Equal Weight rating on the bank's shares. The revision follows the bank's recent filings and presentations, which have led to a reassessment of its projected earnings and operational performance.
The bank's financial update, which was disclosed in a 10Q filing on Friday, and a presentation on Monday morning prompted Stephens to revise its operating earnings per share (EPS) estimates for 2024 and 2025. The new forecast sets the 2024 operating EPS at $0.97, down from $1.13, and the 2025 operating EPS at $1.52, decreased from $1.67.
Despite the bank's targets for a 1.10% return on assets (ROA) and a 13% return on tangible common equity (ROTCE), Stephens now sees these goals as uncertain within the current economic climate.
The firm acknowledges the challenges Banc of California faces and suggests that the bank's targets are likely unattainable by the fourth quarter of 2024. Stephens goes further to express skepticism about reaching these objectives even by the end of 2025, predicting a 0.77% ROA in the fourth quarter of that year.
This outlook is based on the assumption that there will be no significant reductions in interest rates, although Stephens' model includes three 25 basis point cuts throughout 2024 and 2025.
Given that Stephens' forecasts are approximately 20% below the consensus, the firm has chosen to maintain its Equal Weight rating on Banc of California's shares.
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