BANC: Fair Outlook Will Reflect Lower Funding Costs And 2025 Growth Potential

Analysts have nudged their fair value estimate for Banc of California slightly higher from $20.23 to $20.41 per share, citing expectations for lower funding costs with only modest pressure on earning asset yields and potential upside to 2025 loan and deposit growth.

Analyst Commentary

Bullish Takeaways

• Bullish analysts highlight that lower funding costs should provide a tailwind to net interest margins, supporting the modest increase in fair value.
• The Overweight rating from JPMorgan, along with a higher price target, signals growing confidence that management can execute on balance sheet optimization and cost of funds initiatives.
• Expectations for only limited pressure on earning asset yields suggest that margin compression risk is manageable, improving visibility into earnings power through 2025.
• Upside to 2025 loan and deposit growth is seen as a key driver for multiple expansion, as the bank demonstrates it can capture profitable market share without materially elevating risk.

Bearish Takeaways

• Bearish analysts caution that the path to lower funding costs may be slower than anticipated if competitive deposit pricing remains elevated, which could cap near term earnings upside.
• There is concern that even modest yield pressure on earning assets, if combined with a weaker macro backdrop, could erode the benefit from cheaper funding and limit valuation re rating.
• Execution risk remains around achieving the projected loan and deposit growth in 2025, particularly if credit standards tighten or demand slows.
• Some skeptics point out that the stock already reflects a portion of the anticipated improvement in profitability, leaving less room for error in delivering on growth and margin targets.

What's in the News

• Completed share repurchase of 13,648,429 shares, representing 8.26% of outstanding shares, under the buyback announced March 17, 2025 (Key Developments)
• Repurchased 2,153,792 shares, or 1.37% of outstanding shares, between July 1 and September 30, 2025, for $35.49 million as the final tranche of the program (Key Developments)
• Total capital returned through the completed buyback reached $185.49 million, reflecting management’s continued use of excess capital to support shareholder returns (Key Developments)

Valuation Changes

• The fair value estimate has risen slightly from $20.23 to $20.41 per share, reflecting a modestly more optimistic outlook.
• The discount rate has fallen slightly from 7.95% to about 7.79%, implying a marginal reduction in perceived risk or required return.
• Revenue growth has edged down fractionally from approximately 11.79% to 11.77%, indicating essentially unchanged top line expectations.
• The net profit margin has decreased slightly from about 26.20% to 25.97%, suggesting a modestly lower long-term profitability assumption.
• The future P/E multiple has risen slightly from 8.52x to about 8.64x, signaling a small increase in the valuation investors may be willing to pay for forward earnings.