B.Riley maintains Buy on CUBI with a price target

On Monday, B.Riley reiterated its Buy rating on Customers Bancorp (NYSE:CUBI) with a price target of $78.00. The firm's analysis highlighted the stock's recent performance issues, noting that CUBI shares have declined 24.5% over the past month. This drop contrasts with the S&P 600 Small Cap Bank Index, which saw a decrease of only 2.2% during the same timeframe.

The recent underperformance of CUBI's stock is attributed to an enforcement letter the company received from the Federal Reserve Bank of Philadelphia two weeks ago. The letter pointed out deficiencies in risk management, compliance, and regulations concerning CUBI's instant payments platform and digital asset strategy.

Despite the enforcement letter's impact, B.Riley believes that the market has now fully accounted for the regulatory concerns in CUBI's share price. The firm suggests that the current share price, which has fallen below the tangible book value of $50.70, presents an attractive buying opportunity.

B.Riley argues that, in the long term, banks like CUBI are well-positioned for growth and market share gains as the banking industry evolves. The firm is confident that CUBI is actively addressing the regulators' concerns and has the necessary personnel and resources to comply with the information requirements set forth by the regulators.

The analysis concludes with a valuation perspective, stating that CUBI's shares are trading at a significant price-to-earnings (P/E) discount compared to the overall small-cap bank sector. B.Riley believes this discount is unwarranted given CUBI's fundamentals and that the bank should command a premium in the market over time. The $78 price target reflects a potential upside of approximately 63% from current levels, based on a 10x multiple of B.Riley's 2025 earnings per share estimate for CUBI.

In other recent news, Customers Bancorp has witnessed significant developments, including robust financial results and strategic personnel appointments. The bank reported strong second-quarter results for fiscal year 2024, with an 11% annualized growth in loans and a 19 basis point expansion in net interest margin. '

The Federal Reserve has imposed enforcement action on Customers Bancorp due to deficiencies in its risk management and anti-money laundering protocols. In response, the bank has initiated measures to enhance these practices.

Additionally, analyst firms Jefferies, KBW, and DA Davidson have raised their price targets for Customers Bancorp. Jefferies maintained a Buy rating, expecting an addition of approximately $2 billion in deposit pipelines due to the hiring of new teams. KBW and DA Davidson also maintained positive ratings, highlighting the bank's significant loan growth, margin expansion, and strong capital position.

Customers Bancorp has also authorized a share repurchase program for approximately 500,000 shares. The bank's future outlook includes maintaining liquidity levels between 25% to 30% and expects a relatively stable balance sheet in 2024.

InvestingPro Insights

The recent volatility in Customers Bancorp's stock price is reflected in real-time data and analysis from InvestingPro. With a market capitalization of $1.52 billion and a notably low P/E ratio of 6.27, CUBI is trading at a discount relative to its near-term earnings growth potential. The company's P/E ratio has slightly adjusted in the last twelve months as of Q2 2024 to 6.21, indicating a consistent valuation perspective. Moreover, the PEG ratio during this period stands at 0.19, suggesting that the stock may be undervalued based on its earnings growth.

InvestingPro Tips highlight that despite the challenges faced, analysts predict CUBI will be profitable this year, and it has been profitable over the last twelve months. This aligns with B.Riley's optimistic long-term outlook for the bank. However, it is important to note that six analysts have revised their earnings downwards for the upcoming period, which could be a factor for investors to consider. Additionally, CUBI does not pay a dividend to shareholders, which might influence investment decisions depending on individual strategies.

For those interested in a deeper dive into CUBI's performance and prospects, InvestingPro offers additional tips and insights. Readers can find further analysis at InvestingPro, which currently lists 11 tips for Customers Bancorp, providing a comprehensive look at factors that could impact the stock's future movements.

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