UPDATE: J.P. Morgan Reiterates Neutral Rating, Raises PT on Washington Federal
In a report published Wednesday, J.P. Morgan & Co. reiterated its Neutral rating on Washington Federal (NASDAQ: WAFD), and slightly raised its price target from $17.50 to $18.00.
J.P. Morgan noted, “WAFD reported CY4Q12 (fiscal 1Q) EPS of $0.33, which was ahead of our $0.31 estimate and consensus of $0.32. The beat was on a combination of provision expense being reported lower than expected (added a penny) as well as the company buying back 2.7 million shares in the quarter, which more than offset the shares being issued for the SVBT transaction. Overall PTPP was largely in line with expectations, although with moving pieces given the SVBT deal closing and the first full quarter benefit of the balance sheet restructuring in August. The company's spread revenues surprised to the upside while expenses also came in higher tied in part to OREO gains reversing back to losses. Although the deal benefited the top line this quarter and overall NIM saw a boost from the balance sheet restructuring as well as higher contribution to earning asset mix from loans, as we look forward the offsetting trend is that on an organic basis loan growth continues to be a challenge with run-off of 10% annualized reported in the quarter. With WAFD now trading at 1.1x TBV and ROTE in 2013 still expected to be in the 8.4% range (below peers at 9.5%), yet with the offset of using excess capital for share repurchase, we see the current discount as fair.
Washington Federal closed on Tuesday at $17.20.
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