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Hilltop Holdings (HTH) Rides on Loans & Solid Balance Sheet

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·3 min read
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Hilltop Holdings Inc.’s HTH focus on revenue growth through improving loan balances will likely support financials despite the low interest rates. The bank’s strong balance sheet position and business restructuring initiatives are expected to act as tailwinds.

Hilltop Holdings remains focused on its organic growth strategy. Though the company’s net interest income (NII) declined in 2020, the same registered a CAGR of 1.6% over the last five years (2016-2020). The rise was partly driven by acquisitions completed during that period. Decent loan and deposit growth, along with solid economic growth, is expected to continue aiding NII in the quarters ahead.

Further, similar to many other banks like Associated Banc-Corp ASB, Northwest Bancshares, Inc. NWBI and PacWest Bancorp PACW, Hilltop Holdings’ restructuring efforts are commendable. In 2020, the bank divested its insurance division – National Lloyds Corporation. Also, over the years, the company has expanded through acquisitions while consolidating of its position in Texas, Oklahoma, Georgia, Tennessee and Arizona.

Hilltop Holdings has a robust balance sheet. As of Mar 31, 2021, the company had total debt of $1.24 billion, and cash and cash equivalents worth $1.56 billion. Supported by this, the company’s capital deployments look sustainable. The bank pays a regular quarterly dividend of 12 cents per share, and in January authorized a new stock repurchase program worth up to $75 million. As of Mar 31, 2021, nearly $70 million worth of shares were left to be repurchased.

Moreover, analysts are bullish on the stock. The Zacks Consensus Estimate for earnings has moved 17.4% and 5.2% upward for 2021 and 2022, respectively, over the past 60 days. Currently, the stock carries a Zacks Rank #2 (Buy). You can the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Also, so far this year, shares of Hilltop Holdings have rallied 36.6%, outperforming the industry’s 31.4% rally.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

However, Hilltop Holdings has been witnessing a contraction in net interest margin for the past several years. Notably, margins are expected to remain under pressure in the near term, given the near-zero interest rate environment and the Federal Reserve signaling no hike in rates anytime soon.

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Hilltop Holdings Inc. (HTH) : Free Stock Analysis Report

PacWest Bancorp (PACW) : Free Stock Analysis Report

Northwest Bancshares, Inc. (NWBI) : Free Stock Analysis Report

Associated BancCorp (ASB) : Free Stock Analysis Report

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