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In a report published Wednesday, Deutsche Bank analyst Dave Rochester upgraded the rating on
Texas Capital Bancshares from Hold to Buy, and raised the price target from $62.00 to $63.00.
In the report, Deutsche Bank noted, “We believe the sell-off (-14%) following another large core EPS miss in 1Q14 is overdone, and expect shares to trade at a stronger premium vs. the group one year out. (1) Stronger core EPS trends vs. the group in FY15 (24% vs. 9%) supported by stronger, above peer loan/deposit growth through FY15 due to recent hires and continued strength expected in the TX economy, which should drive stronger core NII gr. in FY14/15 (+13%/19%) despite further NIM pressure, more than offsetting continued strong expense growth. Multiple new hires from mid 2013 should gain greater traction by 2H14. Additionally, warehouse trends, which were a headwind in 1Q, could actually strengthen in 2Q14 while pricing pressure eases in this business, further supporting NII trends. Finally, we highlight the bank's solid asset sensitivity and stronger core EPS growth, both of which likely continue to support premium trading multiples to the group. TCBI is one of the most asset sensitive banks, (just under 90% of loans reprice immediately). Our TP reflects a 17.5x P/E on FY15 (vs. the current P/E of 18.8x FY14) and 15.5x the midpoint of our core EPS est. range for FY16 excluding rate hikes (vs. the current industry P/E of 13.8x FY15).”
Texas Capital Bancshares closed on Tuesday at $55.23.
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