First Financial, Triumph top price-to-estimated EPS multiples list in December

Abilene, Texas-based First Financial Bankshares Inc.'s shares were still the most richly valued U.S. bank stocks in mid-December, according to an S&P Global Market Intelligence analysis.

S&P Global Market Intelligence analyzed U.S. banks that appear to be valued more as a multiple of earnings than tangible book value. To be included in this analysis, a company needs to have at least four analyst EPS estimates available for calendar year 2023. In addition, the bottom 20% of banks by price to tangible book were excluded.

Top banks

First Financial traded at 20.5x its estimated 2023 EPS as of Dec. 14, compared to the industry median of 9.0x for the 120 banks that were included in this analysis.

Dallas-based Triumph Financial Inc. landed in the second spot, trading at 19.5x. Shares of San Francisco-based First Republic Bank and Louisville, Ky.-based Stock Yards Bancorp Inc. tied for third as they traded at 17.1x.

Piper Sandler analyst Brendan Nosal on Dec. 14 downgraded Stock Yards to "underweight" from "neutral," saying he expects the bank's shares to underperform the coverage group. However, the analyst did hike the 2023 EPS estimate for the company to $4.10 from $4.08.

"Shares have outperformed sharply [year-to-date], widening an already sharp premium to near peak levels," Nosal said. "As such, we see near-term upside as limited."

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Warsaw, Ind.-based Lakeland Financial Corp. was No. 5 in this analysis, trading at 16.7x, followed by Kansas City, Mo.-based Commerce Bancshares Inc., trading at 16.6x.

United Bankshares Inc.'s stock was also among the 20 most valued US bank stocks by price-to-estimated 2023 earnings, trading at 13.4x.

Piper Sandler analyst Casey Orr Whitman on Dec. 5 resumed coverage of the Charleston, W.Va.-based bank with a rating of "neutral" and a 2023 EPS estimate of $2.94. The company's shares have performed well in a flight-to-quality environment, Whitman said.

Wilmington, N.C.-based Live Oak Bancshares Inc.'s stock traded at 13.4x its 2023 EPS through mid-December. J.P. Morgan analyst Steven Alexopoulos on Dec. 13 downgraded the company to "underweight" from "neutral" and cut the 2023 core EPS estimate to $2.38 from $2.42.

Live Oak Bancshares does not have a credit track record that demonstrates it will be able to perform in line with peers through the next credit and economic cycle, according to Alexopoulos.

Returns stay in negative territory

First Financial shares have posted a negative 29.4% return over the last 12 months, compared to the S&P U.S. BMI Banks index's negative 17.2% return and the S&P 500's negative 13.8% return.

Of the 20 most richly valued banks by price-to-estimated 2023 earnings, half have had positive returns year-to-date. Oklahoma City-based BancFirst Corp.'s stock has the highest return at 28.7%, while Live Oak Bancshares has the lowest at a negative 64.5%.