Bryn Mawr's Non-Spread Businesses Show Their Value

In a quarter where bank earnings have been hovering around “okay”, Bryn Mawr (BMTC) showed some of the virtues of its business mix, as strong non-spread businesses offset some noticeable weakness in the core lending operations and drove a beat at the pre-provision line. Not only am I bullish on what these non-spread businesses can do for Bryn Mawr down the road, I’m also generally bullish on management’s plan to shift toward a more balanced commercial lending mix and start targeting some opportunities outside of its core suburban Philly operating footprint.

Valuation doesn’t excite me as much; Bryn Mawr is a better-than-average bank for its peer group, and it’s priced accordingly. I don’t have a problem with a fair value in the neighborhood of $40, but that suggests price appreciation that is more “okay to good” than “must buy now”.

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Bryn Mawr's Non-Spread Businesses Show Their Value

Lackluster Growth And Intermittent Credit Issues Still A Challenge For Fulton Financial

The market turned relatively more bullish on Fulton Financial (FULT) as 2018 wore on, but this Mid-Atlantic bank remains somewhat hamstrung by sluggish growth trends and intermittent credit issues, including a provisioning for a sizable ag credit in the fourth quarter after a fraud-related loss earlier in 2018. On a more positive note, though, cost leverage should improve more markedly over the next couple of years and that should help drive mid-single-digit pre-provision earnings growth.

I like Fulton’s expansion efforts in Philly and Baltimore, and I believe the bank will likely return to M&A in 2020 after the expected resolution of its remaining consent orders and the consolidation of its banking charters. I remain concerned about the bank’s loan growth prospects, though, and I think there are better bargains in the banking sector, including the Mid-Atlantic region.

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Lackluster Growth And Intermittent Credit Issues Still A Challenge For Fulton Financial

Fulton Financial Still Floundering

It looks like the struggle for Fulton Financial (FULT) shares to find some traction is going to go on a little longer. Investors were already a little impatient with the slow progress in resolving the BSA/AML consent orders that have prevented the bank from consolidating its charters and participating in M&A, but now they also have to digest a sizable fraud-related loss and ongoing sluggishness in core lending growth.

Although the potential for better long-term results is certainly here, the shares have already been reflecting that potential for some time, and I believe the lack of execution on that potential goes a long way toward explaining why the shares have not only lagged regional bank ETFs, but peers (in terms of asset size) like Western Alliance (WAL), Chemical Financial (CHFC), Old National (ONB), United Bancshares (UBOH), and UMB (UMBF) on a year-to-date, one-year, and two-year basis.

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Fulton Financial Still Floundering