It's been an interesting year for UMB Financial (UMBF), and one with some choppy quarterly performances, but overall more good than bad and this Midwestern bank starts 2022 on a pretty good foot with a diverse commercial lending and fee-generating service portfolio that I believe will hold up well across the next cycle. While the asset sensitivity isn't all an investor might want, at least initially, I think the significant deployable capital here remains an important asset.
I had mixed feelings on UMB Financial a year ago, leaning positive due to the quality of the business and the surplus capital, but also having some concerns about the timing on the deployment of that capital. The shares are up about a third since then - outpacing smaller banks in general by more than 10% and the company's self-selected peer group (which can be viewed on the last page of the quarterly earnings presentation) by a more modest four points or so.
Valuation complicates the investment discussion a little more than last time and leaves less "wiggle room". I can support today's share price without much angst, but I don't see as much near-term undervaluation as for other names. Again, though, that excess capital is a significant swing factor and I don't like getting too negative on businesses and managements I like just because the valuation is less obviously compelling. Said differently, I'd typically rather own a good bank with an iffy valuation than an iffy bank with a good valuation.
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