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On Thursday, analysts at Raymond (NSE:RYMD) James lowered the price target for VersaBank stock (NASDAQ: VBNK) to $13 from $15, while maintaining an Outperform rating. The decision follows the bank’s fiscal second-quarter 2025 results, which aligned with market expectations. According to InvestingPro data, the bank currently trades at a P/E ratio of 14.5x with a market capitalization of $351 million.
Shares of VersaBank fell by 6.5% on the day, compared to a 1.2% decline in the KBW Regional Banking Index (KRE). The stock’s performance was attributed to a cautious outlook, with the bank noting a relatively flat yield curve. This is expected to result in a stable net interest margin (NIM) in the near term, despite a 21 basis point expansion in the second quarter. InvestingPro data shows the stock has declined 21.7% year-to-date, with two analysts recently revising earnings expectations downward.
Despite these challenges, Raymond James remains positive on VersaBank’s long-term prospects. The bank reiterated its fiscal year-end growth targets, including $290 million in U.S. residential property portfolio (RPP) and $1 billion CAD in Canada Mortgage and Housing Corporation (CMHC)-insured multifamily residential commitments. The Canadian insolvency business continues to meet expectations, with anticipated growth in low-cost deposits.
VersaBank is also progressing with plans to divest its Digital Resource Technology Corporation (DRTC) and aims to bring its digital deposit receipts (DDRs) to market. These initiatives are not yet included in Raymond James’ financial model.
Overall, while near-term earnings growth may be impacted by a narrower NIM, Raymond James believes the bank’s organic growth and strategic initiatives present favorable risk/reward opportunities. InvestingPro analysis indicates the stock is slightly undervalued, with additional insights available in the comprehensive Pro Research Report, which covers over 1,400 US stocks.
In other recent news, VersaBank has been the subject of various analyst reviews and strategic developments. Analysts at Raymond James have maintained an Outperform rating for VersaBank, with a price target set at $15.00, following the bank’s recent earnings results that exceeded expectations in certain areas like net interest income, despite higher noninterest expenses. The bank’s decision to move its headquarters to the United States is seen as a strategic move, potentially reducing regulatory costs and broadening its investor base. Keefe, Bruyette & Woods have adjusted their price target for VersaBank from $27.00 to $22.00 due to slower growth in the U.S. Point of Sale business, while still maintaining an Outperform rating, citing the bank’s long-term potential.
Conversely, Roth/MKM has downgraded VersaBank from Buy to Neutral, slashing the price target to $10.40, driven by concerns over slow loan growth and delays in the U.S. Recurring Payment Program. The bank’s first-quarter results for fiscal year 2025 showed a 9.1% loan growth rate, the lowest since early 2021, attributed to weak economic fundamentals in Canada. Despite these challenges, VersaBank is actively marketing its cybersecurity subsidiary, DTR Cyber, for sale, and sees potential in its new Digital Meteor segment, which focuses on digital deposit receipts. Raymond James also noted the operational start of VersaBank’s first U.S. RPP partner, which came later than expected, affecting loan balances.
Overall, VersaBank’s recent developments highlight a mix of strategic shifts and financial challenges, with analysts maintaining varied outlooks on the bank’s future performance.
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