After doubling in 2023, shares of Customers Bancorp (NYSE:CUBI) have pulled back over 20% year-to-date and could represent a buying opportunity. The latest earnings report outperformed analysts’ predictions, demonstrating the bank’s solid fiscal capacity. Also, the company’s management has high hopes for enhanced revenue expansion with the recent integration of ten new commercial and business banking teams.
Shares of CUBI stock are relatively undervalued, making it a potentially appealing investment opportunity.
Customers Bancorp’s Expanding Franchise
Customers Bancorp is a bank holding company that operates primarily through Customers Bank. The organization offers a diverse range of financial products and services tailored for individual consumers as well as small and middle-market businesses. The bank’s offerings cover traditional deposit banking products and more specialized lending options for finance, technology, and venture sectors. In addition, the company has a unique blockchain-based instant business-to-business (B2B) payments platform.
In April, the bank expanded its commercial-focused banking teams with ten new and highly experienced groups stationed in the New York metropolitan area and selected markets in California and Nevada. These teams are expected to enhance the deposit franchise significantly. By adding these teams, the bank aims to increase the number of its low-cost, granular, primary relationship-based bank accounts and high-tech banking capabilities.
Furthermore, Customers Bank distinguishes itself from its competitors in the market, not only through its robust capitalization and ample cash reserves (making up 34% of total assets) but also due to its minimal exposure to Commercial Real Estate (CRE) loans, unlike other peers. This positioning gives the bank a unique advantage, as it lessens potential risks connected with the CRE market.
Customers Bancorp’s Recent Financial Results
In Q1 2024, Customers Bancorp reported a non-GAAP EPS of $1.68, outperforming expectations by $0.05. Revenue was $181.6 million, an 8.1% increase from the previous year.
The bank noted a positive growth in its financial health with a CET 1 (Common Equity Tier 1) ratio of 12.5% in Q1 2024, an increase from the previous quarter’s 12.2%. The company’s TCE/TA (tangible common equity/tangible assets) ratio rose from 7.0% in Q4 2023 to 7.3% in Q1 2024. Total deposits increased by $41.1 million, with non-interest-bearing deposits growing by $266.4 million. Total estimated insured deposits accounted for 78% of total deposits, with an available liquidity of 224% covering estimated uninsured deposits.
Notably, the company’s non-performing assets stood at $35.8 million, representing 0.17% of total assets. Finally, the provision for credit losses on loans and leases was reported at $16.0 million, compared to $13.4 million in the previous quarter, with credit loss reserves coverage decreasing slightly from 1.13% to 1.12%.
What Is the Price Target for CUBI Stock?
Analysts following Customers Bancorp have mostly been constructive about the stock. Maxim Group analyst Michael Diana recently reiterated a Buy rating and set a price target of $75.00 on the shares. He noted the recent quarterly earnings, management’s optimistic outlook, and the bank’s stable credit quality.
Customers Bancorp is rated a Strong Buy based on five analysts’ recommendations and price targets over the past three months. The average price target for CUBI stock is $64.60, representing an upside of 43.02% from current levels.
While the stock is up over 83% in the past year, it has been trending lower since January. It sits toward the middle of its 52-week range of $22.90-$60.09 and continues to show downward momentum, trading below its 20-day (47.73) and 50-day (48.91) moving averages. It looks to be relatively undervalued, with a P/E ratio of 6.3x compared to the Regional Bank industry average of 8.3x.
Final Analysis of CUBI
Customers Bancorp continues to showcase its robust financial capabilities, with promising expansion strategies and an underappreciated stock price. Recent growth in the bank’s commercial banking teams aims to enhance revenue via enriched client relationships and high-tech banking services. As the company continues to evolve and expand, the potential value of CUBI stock becomes increasingly appealing.
