South State Bank Underperforming As It Digests Its Latest Deal

Whole bank acquisitions are a time-tested strategy for growth and value creation, but it takes time to realize the value and the shares of acquirers can underperform during the integration process. Such would seem to be the case with South State Bank (SSB), which has lagged the regional bank ETF so far this year and lagged most of its similarly-sized peers. Although there’s nothing fundamentally wrong with the bank, unpredictable expenses and weak loan growth during the integration process have led to lackluster reported results.

I still believe that South State’s acquisition of Park Sterling will look like a good move in the future, but it’s clear that the market isn’t inclined to show much patience as South State restructures the acquired loan book and the deposit base. I’ve trimmed back my fair value slightly on lower near-term earnings, but I continue to believe that South State can generate double-digit long-term earnings growth and that the shares should trade closer to $100.

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South State Bank Underperforming As It Digests Its Latest Deal