Piper Jaffray Upgrades Investors Bancorp (ISBC) to Overweight
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Piper Jaffray upgraded Investors Bancorp (NASDAQ: ISBC) from Neutral to Overweight with a price target of $13. Analyst Matthew M. Breese thinks the company will be on the sideline in terms of future M&A, alleviating near-term fears of additional dilutive deals.
Breese explained, "In short, we favor ISBC as a deep value, defensive long name that trades on P/TBV with greater relative upside vs. peer TFSL with similar characteristics. Despite a recent negative headline that Investors Bancorp is now under an informal agreement by its bank regulators, the FDIC and NJ Department of Banking and Insurance, we believe the order could have a positive effect on the overall valuation."
"Specifically, we believe there is some negative overhang on the stock driven by the perception that management is an active acquirer and would be willing to do deals that could push the limits on acceptable TBV earn back timeframe. In our view, this perception stems from the sale of Astoria Financial (AF) to New York Community (NYCB), where we believe ISBC may have been an interested party. Publicly, management has stated they would stay within the acceptable earn back timeframe (five years or less on the standalone method), but our view is that there is lingering skepticism from the investment community. With the informal agreement, we believe the company will remain on the sidelines in terms of additional M&A and will focus on a more traditional path of capital deployment consisting of organic loan growth, share repurchases and dividends in the near-term. With a significant overhang removed and a projected ROA of 70-80bp through 2018, we believe the stock warrants at least an inline multiple with similarly profitable peers of 1.3x TBV vs. the stock’s current valuation of 1.1x," added the analyst.
Shares of Investors Bancorp closed at $11.63 yesterday.
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