On Monday, Piper Sandler maintained a Neutral rating on HomeStreet (NASDAQ:HMST) stock with a price target of $11.00. The firm's decision follows HomeStreet's recent agreement to sell a portfolio of multifamily loans valued at $990 million to Bank of America Corporation (NYSE:NYSE:BAC). The sale price is set at $906 million, representing an 8.54% discount.
The transaction is part of HomeStreet's strategic moves to enhance profitability and manage its commercial real estate (CRE) loan concentration, following the termination of a previously planned merger. According to InvestingPro data, HomeStreet currently trades at a Price/Book ratio of 0.39, with a concerning financial health score rated as 'WEAK' by the platform's comprehensive analysis.
HomeStreet's decision to offload these assets was initially predicated on the company's intent to sell approximately $800 million in longer-duration multifamily loans. However, the actual sale exceeded this figure, which is expected to positively impact the company's financials.
According to Piper Sandler's analysis, the sale will aid in reducing HomeStreet's CRE concentration from 619% to a still elevated 517%. This strategic move comes as the company faces significant challenges, with InvestingPro data showing a concerning revenue decline of 24.63% and negative free cash flow in the last twelve months.
The financial institution's fourth-quarter 2024 estimated operating earnings per share (EPS) loss has been adjusted by Piper Sandler to -$0.29 from -$0.26. Furthermore, the firm has revised its earnings expectations for the following years, projecting an EPS of $0.37 for 2025 and $0.77 for 2026, up from the previous estimates of -$0.62 and $0.10, respectively.
Despite these adjustments, Piper Sandler's price target for HomeStreet remains unchanged at $11.00, which is based on the firm's assessment of the bank's marked-to-market tangible book value. For deeper insights into HomeStreet's financial health and additional analysis, including 8 more key ProTips and comprehensive valuation metrics, visit InvestingPro.
In other recent news, HomeStreet Inc (NASDAQ:HMST). has made significant strategic moves. The company recently sold a $990 million loan portfolio to Bank of America. The sale is part of a strategic plan aimed at returning the bank to profitability, following a revenue decline of 24.6% and negative earnings in the last twelve months. The proceeds from the sale will be used to repay Federal Home Loan Bank advances and brokered deposits.
In another development, HomeStreet has terminated its merger agreement with FirstSun Capital Bancorp (NASDAQ:CBNK) and Dynamis Subsidiary, Inc. The termination was mutually agreed upon by all parties involved, as documented in a recent 8-K filing with the Securities and Exchange Commission. The reasons for the termination, as well as any potential financial penalties associated with it, were not disclosed.
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