Amalgamated Bank Has Unique Deposit Base, Raymond James Says In Bullish Initiation

Amalgamated Bank AMAL recently offered 6.7 million shares in an IPO priced at $15.50, within the estimated price range of $15 to $17.

With the IPO quiet period expiring, the sell-side is starting coverage of the company. 

The Analyst

Raymond James analyst William Wallace initiated coverage of Amalgamated Bank with an Outperform rating and $20 price target.

The Thesis

Amalgamated Bank, a union-owned bank, has seen meaningful improvements in profitability and efficiency metrics thanks to a financial transformation it underwent over the last few years that led to improved credit metrics, significant branch closures, robust core deposit growth and expense rationalization, Wallace said in a Friday note. (See the analyst's track record here.) 

The company has recently expanded on the west coast through its first-ever acquisition, the analyst said.

Amalgamated will now pursue a combination of organic growth and M&A-led growth in its pursuit to become the nationwide values-driven bank of choice, he said. 

The bank's unique base of labor union, non-profit and political action committee deposits are likely to fare well in a rising rate environment, Wallace said. The New Resource deal could catalyze earnings and aid in market share expansion, he said. 

Raymond James estimates non-GAAP EPS of $1.35 for both 2018 and 2019.

"Ultimately, with our expectation for solid balance sheet growth, improving efficiency and a unique funding base that should demonstrate a better-than-peer deposit beta, we view the risk-reward dynamic positively at current valuation levels," Wallace said. 

The Price Action

Amalgamated Bank shares have gained 15.8 percent since their Aug. 9 listing. 

Related Links:

The IPO Outlook For The Week: An Airline, A Biotech And 2 Banks

Bank On This Bank ETF