Hancock Whitney Has Above-Average Upside, But It Requires Self-Improvement

With many banks on the prowl for M&A, I believe that to some extent banks will need to “earn” their right to stay independent; if a bank cannot generate sufficient returns on capital on their own, sooner or later another bank is going to make the shareholders an offer they won’t refuse. In the case of Hancock Whitney (HWC), a legacy of underperformance with respect to margins and returns (ROE, ROTCE, et al) but a good core deposit base makes this a prime candidate for a “get better or get bought” story.

Management at Hancock is still in the relatively early stages of a meaningful cost-cutting program that I believe, coupled with eventual improvements in interest rates, can drive returns on equity back to 10% or better and drive long-term core earnings growth in the mid-single-digits. That, and a low double-digit ROTCE in 2021 and 2022 should support a fair value in the low $40s and a double-digit annualized total return opportunity.

 

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Hancock Whitney Has Above-Average Upside, But It Requires Self-Improvement