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Bank Of The Ozarks Among The Greatest At Originating Real Estate Loans

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Earnings Scheduled For October 11, 2017
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Wells Fargo reiterated its Market Perform rating on Bank Of The Ozarks Inc (NASDAQ: OZRK) after the company’s quarterly operating EPS of 0.68 topped Street estimates by $0.04.

However, slower growth partially offsets a better NIM run rate as the brokerage increased its FY2016 EPS view to $2.55 from $2.46, but lowered FY2017 view by $0.08 to $2.97.

NIM increased +8bp quarter-over-quarter to 4.90 percent, topping Wells Fargo's estimate of 4.76 percent on improving LIBOR rates, elevated prepayment fees, and higher origination yields. Management expects the elevated pace of loan prepayments to continue in the fourth quarter, with the associated fees helping provide a level of NIM support.

“Regulatory risk surrounding commercial real estate (CRE) levels continues to pressure OZRK stock, in our view, and while mgmt. remains optimistic on the health of the space (loan growth +34% YID), we do not see regulatory pressure abating near term as we reiterate our Market Perform rating,” analyst Timur Braziler wrote in a note.

In addition, prepayments drove lower loan guidance as management now indicating that loan growth may fall short of the original $3.0 billion target issued in January.

Meanwhile, despite continued industry concerns surrounding the CRE space, the company remains comfortable with both their current exposure and future growth rate.

“We view OZRK as having amongst the greatest expertise in originating CRE, driving TA+ CAGR in the portfolio since 2012. Despite strong historical asset quality trends and a conservative underwriting approach, the current regulatory environment could potentially result in a requirement to hold extra capital or slow growth,” Braziler noted.

Braziler has a valuation range of $41-43 on the stock.

Latest Ratings for OZRK

DateFirmActionFromTo
Oct 2017Raymond JamesMaintainsOutperform
Oct 2017PiperJaffrayAssumesOverweightOverweight
Aug 2017Morgan StanleyInitiates Coverage OnOverweight

View More Analyst Ratings for OZRK
View the Latest Analyst Ratings

Posted-In: Timur Braziler Wells FargoAnalyst Color Price Target Reiteration Analyst Ratings

 

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