I'm still bullish on these shares. I like the mix of organic growth opportunities driven by lending and deposit market share gains and branch expansion in markets like Baltimore and Washington, D.C., as well as the tuck-in M&A opportunities across its footprint. The shares aren't quite as undervalued as they used to be, and I'm a little concerned about slowing core growth in 2024, but I think the risk/reward balance here is still pretty favorable.
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Bank stocks have been on quite the rollercoaster since my last article on Pittsburgh’s F.N.B. (FNB), and while the stock has fared better than most in its peer group (and has outperformed regional banks by about five points), the barely-positive low single-digit total return since then is certainly not inspiring.
How F.N.B. management intends to pursue growth remains a key point of contention around the stock. The market isn’t overly impressed with a bank where so much of the business skews to slower-growing markets like Pittsburgh, Baltimore, and Cleveland, and likewise wasn’t too impressed with the recent acquisition of a small bank in Baltimore at a generous premium. The shares do continue to look undervalued on a mid-single-digit core earnings growth rate, but I feel that the market needs more visibility to better profitability and/or growth before a significant rerating is likely.
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F.N.B. Seeing Signs Of Improving Loan Demand, But Execution Still Needs To Improve
