PNFP shares supported by Citi's confidence in robust loan and NII growth outlook

On Monday, Citi analyst Benjamin Gerlinger updated the price target for Pinnacle Financial Partners (NASDAQ: NASDAQ:PNFP) stock, raising it to $132 from $123, while reiterating a Buy rating. Gerlinger’s revision reflects a positive outlook on the company's growth potential over the next two to three years, particularly in terms of loan growth, which is expected to outpace peers.

The analyst pointed out that while fourth-quarter 2024 results might not meet current expectations due to high deposit growth affecting the net interest margin (NIM), Pinnacle Financial is poised for strong performance in the longer term. With a market capitalization of $8.7 billion and a strong 43% price return over the past six months, the company is anticipated to maintain its trend of adding lenders at a rate above its peers, which should contribute to a notable increase in loan growth.

Despite a slight increase in projected expenses for the years 2025 and 2026, Gerlinger believes that the financial outlook for 2025 should exhibit low-double digit growth across key areas such as net interest income (NII), loans, and expenses. Furthermore, Pinnacle Financial is considered to be in a good position to benefit from potential lender additions if merger and acquisition activity increases within its market footprint.

The new target price of $132, which is a $9 increase from the previous target, is based on the company's potential for both loan growth and NIM improvement once the current excess cash is put to use in lending activities. Gerlinger's commentary underscores the firm’s confidence in Pinnacle Financial’s strategic positioning and growth trajectory in the coming years.

In other recent news, Pinnacle Financial Partners experienced robust growth in the third quarter, with significant increases in loans, deposits, and earning assets. The company has adjusted its 2024 loan growth expectation to 7%-8% and raised fee revenue expectations to 23%-26%. Additionally, Pinnacle Financial received a price target increase from Citi, raising it to $123.00 from $113.00, reflecting the firm's confidence in the bank's growth prospects.

Citi's revised price target is primarily driven by heightened confidence in Pinnacle Financial's growth trajectory and a favorable banking yield curve looking ahead. The firm expressed a positive outlook on the bank's revenue growth, including both net interest income and fee income, projected for 2025.

These are recent developments that highlight the firm's confidence in Pinnacle Financial's ability to capitalize on the current market conditions and its strategic initiatives to foster growth in the coming years. Despite the optimistic growth and revenue projections, Citi foresees limited expansion in the bank's Net Interest Margin until there is an increase in the long end of the interest rate curve to reach a more standard level.

Pinnacle Financial's management expressed optimism about the 2025 outlook, driven by strategic hiring and market positioning. The company anticipates substantial balance sheet growth in 2025 and 2026, supported by ongoing consolidation efforts and expansion into new markets.

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