First Citizens BancShares (FCNC.A): Margin Decline Challenges Bullish Value Narrative Despite Low P/E

First Citizens BancShares (FCNC.A) reported revenue growth of 3% per year, trailing the broader US market's 10% rate. Earnings are expected to decline by 0.2% annually over the next three years, while the net profit margin slipped to 25.5% from 27% a year earlier. Despite the lackluster near-term growth outlook, investors considering the stock may be drawn to its attractive valuation multiples and track record of strong long-term earnings growth.

See our full analysis for First Citizens BancShares.

Next, we will see how these numbers compare to the narratives widely discussed by analysts and investors, and where the conventional wisdom might get challenged.

See what the community is saying about First Citizens BancShares

Share Repurchases Set to Boost EPS

• Analysts expect First Citizens BancShares to reduce its number of shares outstanding by 7% per year over the next three years. This is expected to provide a direct lift to earnings per share even as total earnings are projected to slip from $2.3 billion to $2.2 billion by 2028.
• The consensus narrative highlights management’s ongoing share repurchase programs as a practical lever intended to support EPS and help offset falling profit margins.
  • Repurchases are forecast to significantly boost per-share profit, keeping investor returns competitive even as net profit margin is projected to contract from 26.0% to 22.6% during the forecast period.
  • Consensus also points to strategic capital allocation and confidence in asset quality. These buybacks are expected to partially stabilize the margin picture even if broader earnings momentum is lacking.

PE Ratio Signals Deep Value Gap

• First Citizens trades at a price-to-earnings ratio of 9.9x, a sizable discount to peer banks at 19.5x and also below the US industry average of 11.2x. Its $1,775.21 share price is 30% below its DCF fair value of $2,545.08.
• The consensus narrative highlights that this unusually low PE and steep discount to DCF fair value are fueling investor interest in the stock’s value credentials.
  • While forecasts do not call for significant near-term growth, consensus still views the share price’s substantial gap to both peer multiples and DCF as a rare value opportunity in a slow-growth environment.
  • Analysts specifically note that the muted valuation provides a margin of safety even in the context of margin compression and a subdued outlook, citing the $2,170.38 analyst target as further upside from current levels.

Sensitivity to Lower Interest Rates

• The consensus narrative indicates that earnings could face further pressure if interest rates are cut multiple times, with reduced net interest income threatening to squeeze the core banking model’s profitability.
• Bears draw attention to First Citizens’ asset-sensitive balance sheet, arguing that the end of the FDIC loss-share agreement and exposure to commercial real estate portfolios may increase the company’s exposure to elevated credit losses.
  • Credit risk in acquired portfolios, especially those from SVB, is a focal point for bearish analysts who caution that elevated charge-offs or significant NII pressure could further unsettle the current margin picture.
  • Management’s confidence in asset quality is being closely monitored, as any decline in credit performance would quickly be reflected in profitability metrics.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for First Citizens BancShares on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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A great starting point for your First Citizens BancShares research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

See What Else Is Out There

First Citizens faces slowing earnings growth, shrinking margins, and challenges if interest rates fall or credit performance deteriorates further in its acquired portfolios.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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