Pacific City Financial's Fundamentals Make Raymond James Bullish

Pacific City Financial Corp PCB, a U.S.-based Korean-American bank, boasts solid fundamentals, according to a bullish Raymond James analyst.

The Analyst

Analyst Donald Worthington initiated coverage of Pacific City with an Outperform rating and $22 price target, suggesting roughly 10-percent upside from current levels.

The Thesis

Pacific City has generated strong loan and deposit growth, with above-average profitability metrics, excellent credit quality and sound capital ratios, Worthington said in the Tuesday initiation note. (See the analyst's track record here.) 

Return on average assets and return on average equity during the last 12 were 1.24 percent and 12.58 percent, respectively, the analyst said. Pacific City's non-performing assets as a percentage of total assets stood at a low 0.13 percent, while reserve coverage is a robust 623 percent of total non-performing assets, he said. 

"Capital ratios comfortably exceed the minimums required to be considered well-capitalized according to the regulatory definitions," the analyst said. 

Raymond James set EPS estimates of $1.74 for 2018 and $1.92 for 2019 with the expectation that bottom-line growth will be fueled by revenue growth.

While noting that the bank's shares trade at a discount, Worthington said the discounted valuation is unwarranted given "strong loan and deposit growth, above-average profitability metrics, asset-sensitive balance sheet and excellent credit quality."

The Price Action

Pacific City shares are up a mere 0.3 percent since their Aug. 9 listing. The stock was trading up 2.87 percent to $20.58 at the time of publication Tuesday.

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