It may seem like damning with faint praise, but there's nothing all that unusual about the business strategy that United Community Banks (UCBI) is following. A smaller bank still focused principally on commercial real estate lending, UCBI has used serial acquisitions of small banks to build its operations, and the company remains focused on attractive fast-growing markets in the Southeast.
It's been a while since I've written about United Community, but over the past five years, the company has more or less tracked the small bank sector. United Community operates in increasingly competitive markets, but the bank prioritizes high-touch customer service at a time when many larger banks are trying to shift more commercial lending to a digital-enabled "DIY" model. What's more, there's still room for the company to expand beyond CRE lending, with asset-backed lending, equipment finance, healthcare, and SBA lending all offering opportunities.
United Community doesn't jump off the page as being dramatically cheaper than other growth banks, but I do still believe that a lot of growth banks are trading with some worthwhile upside. Between attractive underlying markets, opportunities to expand the lending franchise, and more M&A in the future, I believe that UCBI could generate long-term earnings growth in the double digits, making the current 11.5x multiple on 2023 earnings (similar to banks with more modest growth expectations) worth a further look.
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