Sunday, February 12, 2017

United Community Banks Leveraging Its Deposit Base, Capital, And Service Model Effectively

Most banks these days are telling similar stories. While larger banks are focused on tightening up spending and holding down the fort until rates increase, smaller banks are by and large trying to take advantage of healthy demand for commercial real estate and business loans, while also looking for opportunities to deploy surplus capital into M&A to grow their business.

Insofar as all that goes, United Community Banks (NASDAQ:UCBI) isn't all that unusual. Nevertheless, I think there are some attributes about this bank that do stand out. The company has tried to prioritize customer service and that may pay off in the form of stickier deposits as rates rise. At the same time, management has been focusing a lot of its attention on growing specialty lending businesses that allow it to step away from the more intensely competitive commodity lending categories. UCBI also has the benefit of serving growing communities and leveraging a relatively attractive deposit base.

Like so many banks now, it's hard for me to argue that United Community Banks shares are undervalued. That said, they do seem priced for a high single-digit total return (which isn't bad), and this bank could see additional benefits if the new president's administration comes through with plans to lower corporate taxes, reduce regulation on banks, and stimulate economic growth.

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United Community Banks Leveraging Its Deposit Base, Capital, And Service Model Effectively

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