Raymond James Assumes VersaBank (VBNK) at Outperform

Raymond James analyst David Feaster assumes coverage on VersaBank (NASDAQ: VBNK) with a Outperform rating and a price target of $9.00.

The analyst comments "We are assuming coverage of VersaBank with an Outperform rating/$9.00 price target and a MA/ACC suitability rating following investor meetings we hosted with management. The overall tone of our meetings was positive, where the bank has several exciting and potentially transformative opportunities on the horizon. Notably, its recent expansion of its Point-of-Sale (PoS) financing program to the U.S. provides significant growth potential at wider spreads, which is supported by its pending acquisition of an OCC-Chartered bank domiciled in the U.S. (link). Fortunately, the bank has structured its PoS financing to significantly decrease credit risk, where we view the potential for a credit cycle as an opportunity for the bank to validate its business model. If/when proven successful through a cycle we see significant potential for multiple expansion. Furthermore, the bank is in a pilot test for the first digital depository receipt in Canada (CADV), which could be a game changer for its funding base, supporting significant core deposit growth as well as further NIM expansion and NII growth. The likelihood for success is enhanced by the bank’s proprietary VersaVault technology developed by its DRT Cyber subsidiary (DRTC), which provides significant optionality in our view (see link for detail). Ultimately, with shares trading at a discount to peers and its own TBV, the market is significantly discounting its ability to execute on these various initiatives. Conversely, we believe the risk/reward skews favorably given its U.S. expansion plans and prospects for margin expansion, optionality from its DRTC and CADV initiatives, combined with the expected validation of its de minimis credit risk business model through the potential credit cycle."

For an analyst ratings summary and ratings history on VersaBank click here. For more ratings news on VersaBank click here.

Shares of VersaBank closed at $7.47 yesterday.

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