Is this U.S.-China selloff a buy? A top Wall Street voice weighs in
On Wednesday, Keefe, Bruyette & Woods maintained a Market Perform rating on Flagstar Bank (NYSE:FLG) with a steady price target of $13.50. The firm’s analysis indicates growing confidence in the bank’s ability to turn around its credit issues, diversify its business, and achieve profitability by the fourth quarter of 2025. This optimism is rooted in the bank’s latest progress report and its potential for an expanding valuation multiple.
Flagstar Bank’s multi-year efforts to stabilize its balance sheet and implement cost-cutting measures are expected to yield positive pre-provision net revenue (PPNR) by the second quarter of 2025. The bank’s strategy also includes strengthening its capital position, which now boasts an 11.9% Common Equity Tier 1 (CET1) ratio, and reducing risk on its balance sheet, as evidenced by a completed loan review in the fourth quarter of 2024. With its next earnings report scheduled for April 23, 2025, investors seeking deeper insights can access comprehensive analysis through InvestingPro’s detailed research reports.
The bank’s transition from a defensive to a more assertive stance is reflected in its valuation, which has improved to 0.7 times tangible book value (TBV) per share. Despite these positive developments, Keefe, Bruyette & Woods believes that the Market Perform rating remains appropriate in the near term. The firm anticipates that Flagstar Bank’s return on tangible common equity (ROTCE) will likely stay in the mid-single-digit range through 2026.
Looking further ahead, the research firm suggests that achieving the bank’s cost of capital by 2027 and beyond could significantly enhance its valuation. Flagstar Bank’s recent progress and strategic initiatives are seen as pivotal steps in its ongoing transformation and return to profitability.
In other recent news, Flagstar Bank has seen notable developments affecting its financial outlook. DA Davidson has upgraded Flagstar Bank’s stock rating from Neutral to Buy, with a new price target set at $14.50, up from $12.00. This upgrade follows a comprehensive review of the bank’s financial health, highlighting improvements in capital and credit concerns. Flagstar Bank’s Common Equity Tier 1 (CET1) ratio has notably increased by 281 basis points year-over-year to 11.9%, surpassing the peer median. The bank has also enhanced its allowance for credit losses ratio to 1.78%, up from 1.23% in the previous year, demonstrating better control over credit issues.
Meanwhile, Citi analysts have raised their price target for Flagstar Bank to $13.50 while maintaining a Neutral rating. Citi’s revised earnings estimates project a smaller loss per share in 2025 and a significant increase in earnings per share for 2026. The adjustments reflect a more favorable credit outlook and improved loan loss provision forecasts. These changes suggest that while Flagstar Bank is showing signs of financial improvement, there are still risks that investors should be mindful of.
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