A strong balance sheet position and improving credit quality make Flagstar Bancorp FBC an attractive pick now. Further, the bank’s cost-control initiatives are impressive.
Given the strong fundamentals, shares of Flagstar Bancorp have gained 35.3% year to date, as against the industry’s decline of 1.9%.
The Zacks Consensus Estimate for its current-year earnings has remained stable, over the last 60 days. Currently, the stock carries a Zacks Rank #2 (Buy).
Factors That Make Flagstar Bancorp an Attractive Pick
Impressive Balance Sheet Growth: The company’s loans and deposits have witnessed a compounded annual growth rate (CAGR) of 12.6% and 12.7%, respectively, over a four-year period (ended 2016). This makes the company well poised for opportunistic acquisitions in the future.
Prudent Expense Management: The Troy, MI-based lender has reduced its expenses at a CAGR of 15.2% over the last four years (ended 2016). Such cost management initiatives are likely to continue supporting its bottom-line growth.
Improving Credit Quality: Flagstar Bancorp’s credit quality has improved significantly over the years. In 2016, its non-performing assets declined nearly 70% from the 2013 level. Also, it recorded benefit for loan losses of $15 million in 2016 against an expense of $70 million in 2013.
Superior Return on Equity: The company has a return on equity of 9.77% compared with the industry average of 7.02%. This reflects the company’s superiority in utilizing shareholders’ funds.
Improved Efficiency: Flagstar Bancorp reported efficiency ratio of 69.2% in 2016 compared with 109.4% in 2013. It should be noted that a decline in this ratio indicates improvement in profitability.
Other Stocks to Consider
Some other banks worth considering are First Internet Bancorp INBK, First Commonwealth Financial Corporation FCF and Eagle Bancorp EGBN. All these stocks carry a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
First Internet Bancorp’s Zacks Consensus Estimate for current-year earnings has been revised slightly upward in the last 60 days. The company’s share price has risen almost 43%, over the past six months.
First Commonwealth Financial’s current-year earnings estimates have been revised 2.5% upward over the last 60 days. Also, its shares have gained 15% over the past six months.
Eagle Bancorp’s Zacks Consensus Estimate for current-year earnings has moved 2.5% up over the last 60 days. Over the past six months, its share price has rallied 13.9%.
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