Western Alliance Bancorp. had the lowest price-to-estimated 2023 earnings ratio among U.S. bank stocks as of mid-March, while Triumph Financial Inc. continued to have the highest one, according to an S&P Global Market Intelligence analysis.
Least valued banks
The week ended March 10 finished as the third-worst week of sell-offs for U.S. bank stocks since the global financial crisis, with share prices of banks with market caps of over $5 billion dropping the most. During the week, Silvergate Capital Corp. announced plans to wind down its operations and voluntarily liquidate its banking subsidiary, and the California Department of Financial Protection and Innovation took possession of Silicon Valley Bank, a unit of SVB Financial Group. Two days after the trading week ended, the New York Department of Financial Services closed Signature Bank.
Some of the worst-performing stocks by price change during the week ended March 10 were Western Alliance, PacWest Bancorp, Customers Bancorp Inc., Zions Bancorp. NA, First Republic Bank and Webster Financial Corp. The market is mispricing the earnings power of Western Alliance, Webster and other mid-cap banks, according to UBS Securities analyst Brody Preston. Western Alliance's mispricing was due in part to "contagion risk from the Silicon Valley Bank failure with shares pricing in something more dire than is fundamentally supportable in a tech/innovation deposit runoff scenario," Preston said.
Meanwhile, PacWest faced questions about liquidity pressure due to its venture capital exposure, but Piper Sandler analyst Matthew Clark said in a March 13 note that the bank has enough liquidity to withstand a runoff in its venture capital deposits.
Stocks of many regional banks eventually bounced back in early March 14 trading after facing pressure. On March 16, 11 major U.S. banks announced they are making a total uninsured deposit of $30 billion into First Republic Bank, which was hit particularly hard in the wake of the Silicon Valley Bank and Signature Bank collapses.
These banks were also some of the least valued bank stocks by price-to-estimated 2023 earnings as of March 15.
Compared to the industry median of 8.0x for the 149 banks included in this analysis, Western Alliance traded at 3.2x its estimated 2023 earnings per share as of March 15. PacWest traded at 3.4x, Customers Bancorp at 3.6x, Zions at 4.8x, First Republic at 5.2x and Webster at 5.6x.
Most expensive banks
Leading the most expensive bank stocks list, Triumph Financial traded at 24.3x its estimated 2023 EPS. The estimated 2023 EPS for the company is down 39.7% compared to its actual full-year 2022 EPS.
First Financial Bankshares Inc. remained in the second spot, with a price-to-estimated EPS multiple of 19.5x.
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Glacier Bancorp Inc., Lakeland Financial Corp., Prosperity Bancshares Inc. and Trustmark Corp. were also part of the most expensive bank stocks list with price-to-estimated EPS multiples of 15.5x, 15.2x, 11.0x and 10.5x, respectively. On Feb. 21, Raymond James analysts upgraded each of these companies to "outperform" from "market perform."
On March 13, Janney Montgomery Scott analyst John Rodis upgraded Prosperity to "buy" from "neutral," saying the price of the company's stock is an attractive entry point for long-term investors. He trimmed his 2023 EPS estimate by 13 cents to $5.97.
City Holding Co. traded at 12.6x, putting it in the No. 11 spot. The company completed its acquisition of Citizens Commerce Bancshares Inc. on March 10.
Triumph Financial shares booked a return of negative 38.5% over the last 12 months, compared to the S&P U.S. BMI Banks Index's negative 24.1% return and the S&P 500's negative 7.1% return.