On Monday, Piper Sandler updated its outlook on The Bancorp (NASDAQ:TBBK) stock, increasing the price target to $60 from $55 while maintaining an Overweight rating. The Bancorp has outperformed with a second-quarter earnings per share (EPS) of $1.05 and has raised its full-year guidance to $4.35, excluding potential buybacks in the second half of 2024.
The pre-provision net revenue (PPNR) results fell short of expectations due to both net interest income (NII) and expenses, but this was somewhat mitigated by a lower provision.
The company's fee income showed robust growth, rising 10% year over year, and marginally exceeded expectations. The credit quality in The Bancorp's Real Estate Backed Lending (REBL) portfolio presented a varied picture. While non-performing assets (NPAs) remained stable, there was an increased movement in criticized and classified loans, which was adjusted after a large Houston loan was moved to Other Real Estate Owned (OREO).
In a positive development for The Bancorp's balance sheet, an agreement has been reached to sell the building associated with the aforementioned Houston loan, which is expected to be completed without any losses. The Bancorp continues to demonstrate exceptional profitability, boasting a return on assets (ROA) of 2.8% and a return on equity (ROE) of 27%.
With a more than 15% upside to the new target price, Piper Sandler reiterated its Overweight rating on The Bancorp shares. The firm acknowledges the current balance of risk and reward but continues to see significant value in the shares for the longer term.
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