Customers Bancorp (NYSE:CUBI) reported robust financial performance for the third quarter of 2023, exceeding market estimates across all metrics. The company also expressed optimism for future performance, expecting to surpass their full-year core EPS guidance for 2023.
Key takeaways from the call include:
- Record net interest income for the second consecutive quarter, attributed to discount accretion from an acquired loan portfolio.
- Significant core deposit growth, with the company paying down high-cost wholesale deposits and redeeming federal home loan bank advances.
- The net interest margin expanded to 3.7%, with expectations for further increase in Q4 and into 2024.
- The bank's adjusted earnings for Q3 were in the top quartile among banks with assets between $10 billion and $100 billion.
- CEO, Jay Siddhu, expressed his intention to remain active for at least the next two years, citing exciting opportunities for the company.
The bank reported that it had completed its loan portfolio remix, positioning itself well for growth in the coming year. It also noted strong opportunities to strengthen its deposit franchise, with sufficient capital and liquidity to support client needs. The bank expects its fourth-quarter capital to be similar to the third quarter, around $900-950 million.
The management team anticipates loan growth in 2024, primarily driven by venture banking and fund finance. They revealed a $2 billion pipeline and expect $1.5 billion to replenish it. However, deposit balances may remain flat or slightly decline in Q4 due to the transition out of non-core, non-strategic student deposits.
In terms of balance sheet growth for the next year, the focus will be on maintaining capital ratios and loan growth relative to the loan-to-deposit ratio. The bank also mentioned proactive repositioning of their securities portfolio, resulting in higher yields and lower duration risk compared to their peers.
The management team addressed the PPP loan program, stating that they have resolved any issues and clarified that the remaining PPP loans will remain on their balance sheet indefinitely. They also noted that charge-offs from the installment book are expected to decline over time as the portfolio matures.
Looking ahead, the bank highlighted venture banking and fund finance as areas of opportunity for loan growth. They mentioned taking market share and having a strong pipeline in these areas. They also emphasized the existing strength of their community banking, healthcare, and commercial finance businesses.
The call concluded with the CEO expressing gratitude for the support and interest in the company. Despite the expectation of a decline in certain metrics over time, the company remains confident in its portfolio and sees opportunities for growth in 2024.
InvestingPro Insights
According to real-time data from InvestingPro, Customers Bancorp (CUBI) has a market capitalization of 1240M USD, a P/E ratio of 5.58, and a P/E Ratio (Adjusted) as of Q3 2023 of 5.27. This suggests that the company is trading at a low earnings multiple, which is in line with one of the InvestingPro Tips.
The company has shown a significant return over the last week with a 23.82% increase in price and over the last six months with a price uptick of 82.05%. This is backed up by two InvestingPro Tips which point out the strong return over the last week and the large price uptick over the last six months.
InvestingPro Tips also highlight that analysts are predicting the company will remain profitable this year and that it has been profitable over the last twelve months. This aligns with the company's reported robust financial performance for the third quarter of 2023 and its optimism for future performance.
InvestingPro offers a wealth of additional tips for those interested in getting a more detailed analysis of Customers Bancorp. With 14 additional tips available, investors can gain a deeper understanding of the company's performance and potential future movements. For more information, visit the InvestingPro page for Customers Bancorp.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.