Citi raises South State stock rating, target to $128

On Monday, South State Corporation (NYSE:SSB) shares received a positive adjustment from Citi, as the firm's analyst upgraded the bank's stock rating from Neutral to Buy. Accompanying the upgrade, the price target was also increased to $128.00, up from the previous $106.00. The stock, which has delivered a 25.7% return over the past year and currently commands a market capitalization of $10.49 billion, is trading slightly above its InvestingPro Fair Value.

The upgrade was based on the analyst's view that the integration of legacy CenterState, South State, and now Independent (LON:IOG), which form the current South State Bank, presents an attractive operational and earnings outlook. The analyst believes that the current share price offers a compelling risk/reward balance. Notable strengths include the bank's 13-year streak of consecutive dividend increases and a moderate P/E ratio of 14.14, according to InvestingPro data.

South State's recent expansion into Texas and Denver, following the Independent Bank (NASDAQ:INDB) of Texas (IBTX) deal, is acknowledged to potentially introduce operational challenges. However, the analyst considers the bank's valuation, in comparison to its peers, to be an opportunity too significant to overlook at this juncture in the economic cycle.

The bank's balance sheet is noted to be well-positioned for organic net interest margin (NIM) expansion. The analyst anticipates that a restructuring of the bank's securities will more than compensate for the sale lease-back of branches. This move is seen as a reflection of the management team's strong focus on shareholder interests.

The analyst's comments highlight the bank's strategic moves and their expected positive impact on South State's financial performance. With analyst targets ranging from $106 to $135 and a consensus recommendation of 2.12, the market appears optimistic about the bank's trajectory. The upgraded rating and new price target suggest confidence in the bank's future prospects and its ability to navigate the complexities of its expanded market presence. For deeper insights into SSB's valuation and growth potential, investors can access comprehensive analysis through InvestingPro's detailed research reports.

In other recent news, SouthState Corporation has been a focal point for analysts and investors alike. The company's Q4 earnings report was a standout, with adjusted earnings per share reaching $1.93, significantly outperforming the anticipated $1.66. Revenue also saw an uptick, reaching $450.32 million, a considerable increase from the predicted $435.94 million.

The bank's merger with Independent Bank Group (NASDAQ:IBTX), completed at the start of the year, has been a significant development. Raymond (NSE:RYMD) James analyst Michael Rose raised the price target for SouthState shares to $120, maintaining an Outperform rating. This adjustment followed the bank's impressive Q4 results, which exceeded both Raymond James' and the consensus estimates on core earnings per share and pre-provision net revenue.

SouthState's management has also addressed investor concerns regarding the merger's assumptions amid fluctuating interest rates, highlighting measures taken prior to the acquisition's completion. These actions are expected to contribute to net interest margin expansion, a boost in fee income, and continued growth in core loans and deposits.

Furthermore, the company's revenue guidance may be conservative, according to management. If the yield curve steepens further and additional rate cuts are implemented, the benefits to correspondent banking and net interest margin could be greater than anticipated. These are among the recent developments that have taken place at SouthState Corporation.

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