Texas Capital Bancshares Will Be Impacted By Fed's Rate Move, Says Analyst

Texas Capital Bancshares Inc TCBI shares were down in early trading on Monday.

The Federal Reserve is likely to cut its benchmark interest rates three times by 25 basis points (bps) each in 2024, beginning in June, and by three more times by 25bps in 2025, according to Truist Securities.

The Texas Capital Bancshares Analyst: Brandon King downgraded the rating for Texas Capital Bancshares from Buy to Hold, while slashing the price target from $72 to $66.

The Texas Capital Bancshares Thesis: Net interest income (NII) is likely to continue exerting pressure on results “from lower mortgage yields and continued deposit pricing pressures,” King said in the downgrade note.

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“While we think a slower Fed easing cycle should provide some benefit to more asset sensitive names, we expect deposit betas on the downside to be relatively less than they were on the upside, offsetting less pressure on earning asset yields, and drives our NII estimates lower by a median of 1% in 2024 and 2025,” the analyst wrote.

“Most bank management teams are anticipating an acceleration in loan growth sometime later this year, which will likely limit aggressive deposit repricing as retention becomes more important for funding efforts,” he added.

“Our 2024/2025 EPS estimates are 12%/13% below consensus and our 2024/2025 NII estimates are $849m/$878m vs. consensus at $908m/$962m,” King further stated.

TCBI Price Action: Shares of Texas Capital Bancshares had declined by 2.17% to $60.22 at the time of publication on Monday.

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