Hancock Holding Seems Richly Valued For What It Offers

Almost the entire banking sector has gone on a run since the election, so it's not exactly surprising to see that Hancock Holding's (NASDAQ:HBHC) shares ran up about one-third from the time of the election to a recent high of $45.50. Still, this is one where I have a harder time excusing the new premiums, given Hancock's ongoing problematic exposure to souring energy loans, slowing loan growth, and larger challenges in spread income growth.

I think it was smart of Hancock to raise equity at this higher valuation, as it is always better to raise money when you can as opposed to when you must, and it does bump up the company's capital ratios. At this point I could see Hancock as either (if not both) an opportunistic buyer within its current footprint or a seller at the right price. While a larger bank could justify a premium as part of a buyout, I'd be uncomfortable holding a bank stock that really needs that buyout to make the valuation seem reasonable.

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Hancock Holding Seems Richly Valued For What It Offers

Iberiabank In The Middle Of A Tough Balancing Act

While the share price at IBERIABANK Corp. (NASDAQ:IBKC) ("Iberiabank") has rocketed up since the election (along with many, if not most, other bank stocks), there are still a lot of areas where management has work to do. The energy portfolio has shrunk, but credit quality has worsened, and there are some legitimate concerns about how management has been managing excess liquidity in a low-rate environment.

As is often the case with most stocks, a lot of it comes down to valuation. If Iberiabank were trading around 1.5x tangible book, I'd be excited about the deposit footprint and the toeholds in multiple growth markets across the South. As it is, though, I think the Street is more than rewarding the stock for the improvements in operating efficiency, the probable loan growth trajectory, and the possibility of a more constructive regulatory environment.

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Iberiabank In The Middle Of A Tough Balancing Act

Seeking Alpha: Hancock Holding Needs To Marry Better Performance With Its Good Footprint

While speculating on where people are going to want to live in five, 10, or 20 years' time may be enjoyable as a thought-exercise, it's not really a good thesis for investing in any particular company. That said, I believe that Hancock Holding's (HBHC) footprint across the Gulf Coast states is an attractive one on balance, and one where ongoing population trends and the dynamics of the U.S. energy industry are likely to create an attractive operating environment.

Although Hancock's location may be good enough, the recent performance hasn't been. This bank has made something of a habit lately of missing expectations, with weak internal loan growth, higher than expected margin compression, and non-interest expenses weighing down results. A cost-cutting program and sizable share buyback offer some support, but it looks like the valuation here already presupposes better results in the coming years.

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Hancock Holding Needs To Marry Better Performance With Its Good Footprint