There's a lot not to like about Texas Capital Bancshares (TCBI) right now, and before the announcement of the new CEO, that was reflected in a weak relative performance track record over the last two years. Texas Capital has basically been an asset-sensitive spread lender that struggled to generate attractive efficiency ratios and ROA/ROE/ROTCE during the good times, and the company's strengths have largely been in lower-return businesses. On top of that, the bank has seen a noticeable talent drain over recent years, and the dissolution of the proposed merger with Independent Bank Group (IBTX) was yet another body-blow to sentiment.
Now, though, things are looking a little better for banks. Rates aren't likely to improve anytime soon, and loan demand and credit quality are likely to remain headwinds a little while longer, but it looks as though the bear-case scenarios are off the table with respect to credit losses. More specific to Texas Capital, there's a new CEO in place, and hiring the former head of JPMorgan's (JPM) Corporate Client Banking business has certainly helped sentiment.
Valuation and upside now really depend upon what this new CEO can achieve in terms of restructuring, repositioning, and just generally improving the bank. On an "is what it is" basis, I'd argue that Texas capital is now pretty fairly valued. On the basis of what it could become, though, I can see double-digit upside from here.
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