Stockchase Opinions

Gordon Reid PacWest Bancorp PACW-Q DON'T BUY Apr 22, 2019

A regional US bank, but low interes rates and the flat yield curve make him pass on any regional.
$38.820

Stock price when the opinion was issued

banks
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TOP PICK

A regional bank in the California area with about 80 branches. This has been a serial acquirer. They’ve bought a number of small-cap banks ranging from $200 million-$800 million market capitalization. It is really a commercial lender, both on the real estate side and the business side. Net interest margins are quite healthy at more than 5%. Trading at about 17X earnings. Dividend yield of 4.2%. (Analysts’ price target is $56.)

PAST TOP PICK

(A Top Pick Jun. 21'17, Up 23%) They are a highly acquisitive regional bank. Regulation is being lifted off these companies by the Trump administration. They used to have a huge regulatory burdon. It is at about 15 times earnings. He thinks there is opportunity for consolidation in this area.

DON'T BUY
A US regional bank focused on the west coast. But they face a much more fiercely competitive environment. There is not a ton of growth here. They are not that diversified.
HOLD
It hasn't done well. Regional US banking hasn't done well in recent years because of a flattening yield curve which hits all banks. This is slightly changing though as the 10-year yield ticks up a bit and there are hints of inflation coming, given all the government borrowing. The banks have good days ahead. Be patient.
WATCH

His highest exposure to US regional banks, though total exposure is only about 2.5%. Believes it will come through OK, but it depends on crowd mentality, as that's what's driving things at the moment.

WEAK BUY

Regional banks are bouncing back strongly after the spring meltdown. This has rallied 19% recently, instead of failing outright like so many on Wall Street predicted. Based on strong earnings by its peers, he expects a good quarter from PACW in tomorrow's report, but limited upside because it has run up so much already.