In the banking sector it’s typically better to control your own growth as much as possible – by and large, banks that generate strong internal core earnings growth outperform those that acquire it, and banks that generate above-average loan growth tend to outperform those that rely more on rate sensitivity. That makes Sandy Spring Bancorp (NASDAQ:SASR) a name worth paying attention to, particularly with its leverage to the attractive and growing Washington, DC – Baltimore metro corridor.
Sandy Spring is not particularly rate sensitive, but with Russia’s war in Ukraine leading to higher commodity prices (energy in particular) and greater uncertainty, that may not be such a bad thing, as higher oil prices could slow the economy enough to push at least one rate hike off the table. On the other hand, the bank has been showing that it can generate good organic loan growth, and the pipeline going into 2022 looks good.
Valuation isn’t as clear-cut as I would like. The shares aren’t particularly cheap on the basis of ROTCE or as cheap as I might like on long-term core earnings, but the P/E isn’t that high for a bank that should generate good earnings growth in an attractive market.
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