On Wednesday, Hanmi Financial (NASDAQ:HAFC) Corporation (NASDAQ:HAFC) received an upgrade in stock rating by Keefe, Bruyette & Woods, moving from 'Market Perform' to 'Outperform'. Accompanying this upgrade was an increase in the price target for the company's shares, now set at $22.00, up from the previous $20.00.
The firm's decision comes after observing that Hanmi Financial's stock price has declined by 25% since the beginning of 2023, a stark contrast to the KRX index's 1% drop during the same period.
Currently, Hanmi Financial is trading at only 0.8 times its tangible book value (TBV), which represents a 50% discount, and at 8.4 times its projected 2025 earnings and 6.9 times its projected 2026 earnings, a discount of 28-35%.
The analyst from Keefe, Bruyette & Woods noted that while lower interest rates are not a complete remedy, they are advantageous for Hanmi Financial. The bank is expected to see a 42% earnings per share (EPS) growth from 2024 to 2026, which is nearly double that of its peers, driven by a rebound in net interest income (NII).
The analyst also mentioned that the current stock valuations suggest that the downside risk is largely accounted for, while the potential for upside is quite appealing.
The upgrade reflects a more positive outlook on Hanmi Financial's efforts towards diversification, despite the bank's continued focus on commercial real estate (CRE). The analyst believes that the progress in diversification, combined with the expected benefits from lower interest rates, position Hanmi Financial favorably for the coming years.
In summary, Keefe, Bruyette & Woods has shifted their rating to 'Outperform' for Hanmi Financial, citing the bank's strong projected EPS growth and the belief that the current stock price has incorporated most of the potential risks, leaving room for significant upside.
In other recent news, Hanmi Financial Corporation announced robust Q2 earnings, with a net income of $14.5 million, or $0.48 per diluted share. The company also reported a significant increase in new loan production, particularly in SBA loans, and a rise in non-interest income. Furthermore, Hanmi Financial set a Q3 dividend of $0.25 per share, to be distributed to shareholders on record by August 5, 2024.
In addition, the company plans to participate in the 25th Annual KBW Community Bank Investor Conference and has announced the opening of a new branch in the Atlanta Metropolitan area later this year. Amid these recent developments, Hanmi Financial anticipates a low to mid-single-digit loan growth for the year, expecting a similar trajectory in Q3.
The company has also launched a new share repurchase program, demonstrating its confidence in its financial health. However, Hanmi Financial's operations are subject to various risks, including economic conditions, market volatility, and interest rate fluctuations, as outlined in its filings with the U.S. Securities and Exchange Commission.
InvestingPro Insights
Adding to the positive outlook presented by Keefe, Bruyette & Woods, recent data from InvestingPro provides further context to Hanmi Financial Corporation's (NASDAQ:HAFC) financial position and market performance.
The company's P/E ratio of 8.21 aligns closely with the analyst's observation of the stock trading at 8.4 times its projected 2025 earnings, confirming the current valuation discount. This is further supported by the price-to-book ratio of 0.77, which corroborates the analyst's statement about Hanmi trading at 0.8 times its tangible book value.
InvestingPro Tips highlight that Hanmi has maintained dividend payments for 12 consecutive years and has raised its dividend for 3 consecutive years. This demonstrates a commitment to shareholder returns, which could be attractive to investors looking for income stability. The current dividend yield stands at a robust 5.55%, potentially offering a cushion for investors while they wait for the projected earnings growth to materialize.
However, it's worth noting that revenue growth has been negative, with a -11.7% decline in the last twelve months. This could explain the stock's underperformance year-to-date, as mentioned in the article. Despite this, the company remains profitable, with analysts predicting continued profitability this year.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights that could provide a fuller picture of Hanmi Financial's prospects. There are 7 additional InvestingPro Tips available for HAFC , which could offer valuable context to the analyst upgrade discussed in the article.
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