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Rising Expenses, Concentration Risks Hurt BancorpSouth (BXS)

Zacks Equity Research

On May 27, we issued an updated research report on BancorpSouth Bank BXS. The company’s rising non-interest expenses, and a significant exposure to consumer mortgage and commercial real estate loans amid the coronavirus pandemic is concerning.

The Zacks Consensus Estimate for BancorpSouth’s current-year earnings moved 5.4% downward over the past 30 days. The company currently carries a Zacks Rank #5 (Strong Sell).

Its price performance does not seem encouraging as well. Shares have lost 15.5% over the past 12 months compared with the industry's decline of 24.5%.

BancorpSouth’s non-interest expenses have been steadily rising for the past several years. It witnessed a three-year compounded annual growth rate (CAGR) of 11.4% in 2019 due to rise in almost all components of expenses, including higher personnel costs. Costs continued to flare up in the first three months of 2020. Therefore, inorganic growth and digitization efforts are expected to inflate expenses in the days to come.

The company has significant exposure to consumer mortgage and commercial real estate loans, which makes us apprehensive about its growth prospects. As of Mar 31, 2020, the bank’s exposure to these loan portfolios constituted around 62% of total loans. If there is significant deterioration in the real estate prices due to the virus-induced slowdown, it will dampen the company’s near-term profitability.

Nevertheless, the company’s capital-deployment plans and stable debt/equity position are a source of comfort. In July 2019, BancorpSouth raised its quarterly cash dividend by 8.8%. Also, last December, the bank announced a share-repurchase program of up to 8 million shares of its outstanding common stock through December 2020.

Stocks to Consider

Customers Bancorp, Inc.CUBI has witnessed an upward earnings estimate revision of 53% for the ongoing year in the past 30 days. This Zacks #2 Ranked (Buy) stock has depreciated 50.4%, so far this year.

Mid Penn Bancorp, Inc.’s MPB Zacks Consensus Estimate for the current-year earnings moved 42% north to $2.30 over the past month. The stock currently carries a Zacks Rank of 2.

Merchants Bancorp’s MBIN Zacks Consensus Estimate for 2020 earnings moved 11.4% upward to $2.25 over the past 60 days. The stock currently holds a Zacks Rank of 2.

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BancorpSouth Bank (BXS) : Free Stock Analysis Report
 
Customers Bancorp, Inc (CUBI) : Free Stock Analysis Report
 
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