Deutsche Bank Downgrades Texas Capital Bancshares (TCBI) to Hold
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Deutsche Bank downgraded Texas Capital Bancshares (NASDAQ: TCBI) from Buy to Hold with a price target of $66 (unchanged). The downgrade follows a recent run in the stock.
Analyst Meng Jiao said, "We continue to expect the ramp up of MCA will support stronger expected earnings gr. vs. the group, and expect TCBI will benefit from any further strengthening in expectations for more near-term rate hikes, given the much stronger asset sensitivity of the bank, stronger GDP gr., deregulation, etc. That said, the recent run has driven the shares to a valuation which we view as stretched, with shares trading at a P/E of 18.0x our FY17 EPS, representing a 1.7x premium vs. the group, and 15.7x our FY18 EPS, a premium to what we expect for the group multiple one year out, and see the risks as more balanced near-term. We note that higher longer-term interest rates will likely have the impact of slowing refi volumes more materially in 4Q16/1Q17, which could combine with slower purchase activity to drive a decrease in warehouse balances and brokered loan fees during this timeframe, with a more noticeable impact likely in 1Q17, although we expect TCBI will continue to take share in this business while MCA continues to ramp up, partially offsetting this negative to NII and fee income."
Shares of Texas Capital Bancshares closed at $66.75 yesterday.
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