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Versabank (TSE:VBNK)
TSX:VBNK
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Versabank
(TSX:VBNK)
74Outperform
Positive Factors
Digital Banking Model
VersaBank’s digital banking model delivers scalable lending in a risk-mitigated structure.
U.S. Market Entry
EPS growth and rising ROCE benefit from U.S. market entry and continued strength originating RPP loans in Canada.
Negative Factors
Loan Growth
Loan growth of 9.1% Y/Y was the lowest since F1Q21, on weak Canadian fundamentals.
US RPP Rollout
US RPP rollout is moving slower than planned, with discussions with partners slowed by the complexity of the new program.
Versabank (VBNK) vs. S&P 500 (SPY)
Market Cap
$493.96M
Dividend Yield0.66%
Average Volume (3M)33.25K
Price to Earnings (P/E)11.7
Beta (1Y)1.20
Revenue Growth15.44%
EPS Growth-24.34%
CountryCA
Employees121
SectorFinancial
Sector Strength82
IndustryBanks - Regional
Share Statistics
EPS (TTM)1.29
Shares Outstanding32,518,787
10 Day Avg. Volume40,437
30 Day Avg. Volume33,254
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)3.44
Price to Cash Flow (P/CF)-1.10
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$19.07Price Target Upside23.76% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering3
Versabank Business Overview & Revenue Model
Company DescriptionVersabank (VBNK) is a Schedule I Canadian chartered bank that operates in the financial services sector. The bank focuses on providing innovative banking solutions through its digital-only model, offering a range of deposit, lending, and banking services primarily to individuals and businesses. Versabank's core products include personal and commercial deposit accounts, commercial lending solutions, and cybersecurity services through its subsidiary, DRT Cyber Inc.
How the Company Makes MoneyVersabank generates revenue primarily through interest income from its lending activities, which include commercial loans, leases, and mortgages. The bank also earns non-interest income from fees associated with its deposit products and services. Additionally, Versabank leverages its digital platform to maintain lower operational costs compared to traditional banks, enhancing its profitability. Significant factors contributing to its earnings include strategic partnerships, particularly those enhancing its cybersecurity offerings through DRT Cyber Inc., and its ability to attract deposits at competitive rates through its digital banking model.
Versabank Financial Statement Overview
Summary
Versabank demonstrates strong financial health with robust revenue growth, profitability, and cash flow generation. The balance sheet is solid, reflecting prudent leverage management. However, attention is needed on managing liabilities growth and consistent cash flow performance.Income Statement
Versabank has demonstrated strong revenue growth and profitability, with a significant increase in Total Revenue from prior periods. The TTM (Trailing-Twelve-Months) Gross Profit Margin is robust, and Net Profit Margin has also improved, indicating efficient cost management. However, the volatility in EBIT and EBITDA margins suggests potential fluctuations in operational efficiency.82
Very Positive
Balance Sheet
The balance sheet shows a healthy equity buffer with a favorable Debt-to-Equity Ratio, indicating prudent leverage management. The Equity Ratio is stable, reflecting a solid asset base relative to liabilities. Return on Equity (ROE) has improved, showcasing effective use of shareholder funds. However, the potential risk lies in the increasing total liabilities, which may impact future financial flexibility.78
Positive
Cash Flow
Operating Cash Flow is strong, supporting a healthy Free Cash Flow position. The Free Cash Flow to Net Income Ratio indicates efficient cash conversion from earnings. The Free Cash Flow Growth Rate has been positive, though the Operating Cash Flow to Net Income Ratio shows some volatility, suggesting potential challenges in consistent cash generation.75
Positive
| Breakdown | |||||
| TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 155.61M | 111.63M | 108.03M | 82.39M | 65.36M | 54.19M | Gross Profit |
| 202.31M | 111.63M | 238.53M | 82.39M | 65.36M | 54.19M | EBIT |
| 29.76M | 0.00 | 57.65M | 82.70M | 30.79M | 26.75M | EBITDA |
| 47.28M | 0.00 | 59.43M | 34.49M | 32.52M | 27.90M | Net Income Common Stockholders |
| 35.19M | 39.75M | 42.16M | 22.66M | 22.38M | 19.41M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 129.47M | 226.21M | 132.24M | 88.58M | 271.52M | 257.64M | Total Assets |
| 1.53B | 4.84B | 4.20B | 3.26B | 2.42B | 1.94B | Total Debt |
| 49.81M | 108.58M | 110.62M | 104.95M | 100.39M | 16.72M | Net Debt |
| -79.65M | -116.67M | -21.62M | 16.37M | -171.14M | -240.93M | Total Liabilities |
| 1.44B | 4.44B | 3.82B | 2.92B | 2.08B | 1.69B | Stockholders Equity |
| 93.10M | 399.20M | 377.16M | 349.06M | 332.11M | 255.29M |
| Cash Flow | Free Cash Flow | ||||
| 79.45M | 254.13M | 94.36M | -33.23M | -108.32M | 139.35M | Operating Cash Flow |
| 83.48M | 272.70M | 104.55M | -32.65M | -108.31M | 139.59M | Investing Cash Flow |
| -74.36M | -157.58M | -28.14M | -141.61M | -8.44M | 9.76M | Financing Cash Flow |
| 272.70M | -23.33M | 823.25M | -6.30M | 131.40M | -30.85M |
Versabank Technical Analysis
Negative
15.41
Price Trends
15.67
Negative
18.18
Negative
18.30
Negative
Market Momentum
-0.27
Negative
55.76
Neutral
86.05
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:VBNK, the sentiment is Negative. The current price of 15.41 is above the 20-day moving average (MA) of 13.93, below the 50-day MA of 15.67, and below the 200-day MA of 18.30, indicating a neutral trend. The MACD of -0.27 indicates Negative momentum. The RSI at 55.76 is Neutral, neither overbought nor oversold. The STOCH value of 86.05 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TSE:VBNK.
Versabank Peers Comparison
Overall Rating
UnderperformOutperform
Sector (63)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
75 Outperform | $2.35B | 8.73 | 25.28% | 3.41% | 21.86% | 12.85% | |
74 Outperform | $493.96M | 11.75 | 7.85% | 0.66% | 15.44% | -24.34% | |
63 Neutral | $12.06B | 9.31 | 8.10% | 79.51% | 12.80% | -4.67% | |
54 Neutral | $1.18B | ― | -0.24% | 7.03% | -3.68% | -111.41% | |
44 Neutral | $28.88M | ― | -16.02% | ― | 8.35% | 84.36% |
* Financial Sector Average
Performance Comparison
TSE:VBNK
Versabank
15.41
1.86
13.68%
TSE:MOGO
Mogo Finance Technology
1.44
-1.10
-43.31%
TSE:GSY
goeasy
153.41
-16.46
-9.69%
TSE:LB
Laurentian Bank
26.98
2.74
11.32%
Versabank Earnings Call Summary
Earnings Call Date: Mar 5, 2025 | % Change Since: -11.06% | Next Earnings Date: Jun 4, 2025
Earnings Call Sentiment Neutral
The call highlighted significant achievements, including U.S. expansion, successful capital raises, and record assets, indicating positive growth prospects. However, challenges such as decreased revenue, increased expenses, and higher provisions for credit losses were also noted, suggesting areas that need attention. The overall sentiment is balanced with significant positive and negative aspects.Highlights
U.S. Expansion and New Partnerships
VersaBank signed its first RPP partner in the United States following the U.S. bank acquisition, partnering with Watercress Financial. The partnership is expected to significantly contribute to U.S. growth throughout the year.
Successful Capital Raise
Completed a successful $86 million capital raise to support U.S. RPP opportunities, including full execution of over-allotment option.
Record Total Assets
Total assets reached a new high of just under $5 billion, a 15% year-over-year increase and a 3% sequential increase.
Book Value Per Share
Book value per share increased to a record $16.03.
Improving Net Interest Margin
Net interest margin on credit assets increased sequentially, with expectations for further declines in the cost of funds in the near term.
Lowlights
Decreased Revenue
Total consolidated revenue decreased to $27.8 million from $28.9 million last year, driven by lower net interest margin and non-interest income.
Increased Non-Interest Expenses
Consolidated non-interest expense rose to $15.7 million from $12 million in Q1 last year, reflecting incremental operating costs associated with VersaBank USA operations.
Higher Provision for Credit Losses
Provision for Credit Losses increased to 0.09% on average credit assets, influenced by changes in forward-looking information used in credit risk models.
Digital Banking Operations Margin
Net interest margin on credit assets decreased 27 basis points year-over-year, due to the lag effect of an atypical inverted yield curve.
Company Guidance
During VersaBank's First Quarter Fiscal 2025 Financial Results Conference Call, significant guidance was provided emphasizing strategic advancements and financial metrics. The bank reported a 15% year-over-year and 3% sequential increase in total assets, reaching just under $5 billion. VersaBank signed its first U.S. partner, Watercress Financial, post-U.S. bank acquisition, aiming to expand funding throughout the year, contributing to expected U.S. growth. They completed an $86 million capital raise, enhancing their U.S. RPP opportunity. Total consolidated revenue stood at $27.8 million, slightly lower than last year's $28.9 million, due to a reduced net interest margin and lower non-interest income. Canadian digital banking operations generated $23.8 million in revenue, with a net income of $8.8 million or $0.30 per share. The bank's credit asset portfolio reached a record $4.35 billion, driven by a 10% year-over-year increase in the Receivable Purchase Program (RPP) to $3.4 billion. The net interest margin on credit assets was reported at 2.36%, reflecting a slight sequential increase. Looking forward, VersaBank expects further margin expansion due to declining funding costs and plans for significant growth in both Canadian and U.S. RPP operations, with an emphasis on expanding their U.S. presence and leveraging digital deposit receipts to fuel growth.Versabank Corporate Events
Business Operations and StrategyFinancial Disclosures
VersaBank Q1 2025 Results Highlight Strong Business Model and US Expansion
Positive
Mar 5, 2025
VersaBank reported its first quarter 2025 financial results, showcasing the strength of its business model as it expands its RPP solution in the US market. The bank saw a 48% increase in net income compared to the previous quarter, despite a 4% decrease in total revenue from the same period last year. Significant improvements were noted in key financial metrics, including a 33% rise in return on average common equity and a 31% increase in the leverage ratio, indicating robust financial health and strategic growth.
Dividends
VersaBank Announces Quarterly Dividend for Shareholders
Positive
Mar 5, 2025
VersaBank has declared a cash dividend of CAD $0.025 per common share for the quarter ending April 30, 2025. This announcement underscores the bank’s commitment to providing shareholder value and reflects its strong financial position, bolstered by its innovative business model and recent market expansions.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.