On Oct 9, 2013, we initiated our coverage on regional bank BancorpSouth, Inc. (BXS) at Neutral, aided by a rise in non-interest revenues. Moreover, loan loss provision levels stabilized in the quarter with a number of credit quality metrics exhibiting favorable trends. However, regulatory reforms, rising expenses and an unsettled global economy might act as deterrents for this stock.
BancorpSouth’s ability to grow non-interest revenues amid a slowly recovering macroeconomic environment coupled with regulatory upheavals, its capital adequacy and stabilizing credit metrics has prompted us to initiate the stock at Neutral.
In fact, BancorpSouth’s rising non-interest revenues are expected to partially offset net interest margin (NIM) compression in the near term and drive top-line growth. Additionally, BancorpSouth seems attractive for yield-seeking investors due to its steady capital deployment activities. Given its strong capital position, the company hiked its dividend in August by 400%.
However, with the rise in non-interest expenses, the company is exposed to operational risks. Moreover, the recent regulatory norms have increased compliance costs. If these factors prevail, the company’s bottom-line growth will suffer.
For BancorpSouth, over the last 90 days the Zacks Consensus Estimate for 2013 increased 8.8% to 99 cents per share. For 2014, the Zacks Consensus Estimate moved north by 12.3% to $1.19 per share.
BancorpSouth is expected to release third-quarter earnings on Oct 21. The Zacks Consensus Estimate for the third quarter is 26 cents. The Earnings ESP for the company is 0.00% for the quarter. This, along with its Zacks Rank #3 (Hold), reduces chances of a positive earnings surprise.
Other Stocks to Consider
While we are not overly confident about BancorpSouth's potential, we anticipate an earnings beat by 3 other regional banks:
Huntington Bancshares Inc. (HBAN), with earnings ESP of 17.65% and a Zacks Rank #3 (Hold).
Cullen/Frost Bankers, Inc. (CFR), with earnings ESP of 1.04% and a Zacks Rank #2 (Buy).
Fifth Third Bancorp (FITB), with earnings ESP of 4.55% and a Zacks Rank #3 (Hold).
Read the Full Research Report on HBAN
Read the Full Research Report on FITB
Read the Full Research Report on CFR
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