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Republic First Deal & Other Reasons to Buy Fulton (FULT)
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Amid increasing hopes of rate cuts later this year, bank stocks are in the spotlight. But investors should be careful and invest in fundamentally solid banks. So, today, we are discussing one such stock – Fulton Financial Corporation (FULT - Free Report) .
The lender is in the news these days as it acquired Republic First Bank from the Federal Deposit Insurance Corporation (“FDIC”) late last month. Republic First Bank was seized by the U.S. regulators on Apr 26 as it struggled amid a high interest rate regime, which adversely impacted its balance sheet due to high exposure to commercial real estate loans.
Despite taking several measures, including the divestiture of mortgage origination business, headcount reduction and capital infusion, Republic First Bank struggled to remain solvent. Thus, the bank became the first casualty of the regional banking crisis in 2024.
Last year, there were three major bank failures. Silicon Valley Bank and Signature Bank collapsed in early 2023. Silicon Valley Bank was acquired by First Citizens Bancshares, Inc. (FCNCA - Free Report) , while New York Community Bancorp, Inc. (NYCB - Free Report) acquired Signature Bank. Further, in May 2023, First Republic Bank collapsed and was bought by JPMorgan (JPM - Free Report) .
FCNCA took over Silicon Valley Bank’s assets worth $110 billion, deposits of $56 billion and loans totaling $72 billion. The bank also received an available line of credit from the FDIC for contingent liquidity purposes. On the other hand, NYCB acquired $38 billion in assets and assumed $36 billion of liabilities of Signature Bridge Bank, N.A., from the FDIC. Meanwhile, JPM paid $10.6 billion for the bulk of First Republic’s $228 billion of assets and assumed deposits worth $92 billion.
For FULT, the move to acquire Republic First Bank is in sync with the growth strategy of doubling its presence in the Philadelphia market. As part of the deal, the company bought assets of roughly $5.2 billion, which includes an investment portfolio of approximately $2 billion and loans & leases worth almost $2.9 billion.
Moreover, Fulton’s assumed liabilities are worth roughly $5.3 billion, which include deposits of approximately $4.2 billion and other borrowings and liabilities of around $1.3 billion. Also, this will reduce the company’s loan-to-deposit ratio to 92% from 99% and enhance its liquidity profile.
The deal is expected to provide immediate operative leverage via purchase accounting, anticipated cost savings and balance sheet restructuring. The transaction will be accretive to FULT’s 2024 EPS by roughly 20%.
Hence, the financially compelling deal is one of the biggest reasons to invest in FULT stock for solid returns.
Analysts also seem to be bullish about the company’s prospects. Over the past 30 days, the Zacks Consensus Estimate for earnings moved almost 1% and 19.1% upward for 2024 and 2025, respectively. Fulton currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of FULT have soared 11.2% over the past three months against the industry's 0.3% decline.
Image Source: Zacks Investment Research
Here are some of the other factors that make FULT stock worth betting on:
Earnings Strength: Fulton’s earnings witnessed growth of 9.6% over the last three to five years, which compares favorably with the industry average of 6.7%. Though earnings are expected to decline 11.1% this year because of higher funding costs and a tough operating backdrop, the metric will rise 22.9% in 2025.
The company has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 5.49%.
Revenue Growth: Fulton’s revenues witnessed a compound annual growth rate of 5.6% over the last five years (2018-2023). The rise was driven by solid loans and deposit balance and efforts to bolster fee income. The acquisitions completed during the period also supported the top-line growth.
Revenues are likely to keep on improving on decent loan demand, high rates and plans to expand footprint. For 2024, revenues are expected to increase 10.4%, while next year, the metric is projected to rise 4.7%.
Solid Capital Distribution Actions: Fulton’s capital distribution plans seem impressive, through which it is expected to keep enhancing shareholder value. In December 2023, the company’s board of directors approved the repurchase of up to $100 million worth of shares starting Jan 1, 2024, with an expiration date of Dec 31, 2024. As of Mar 31, 2024, approximately $70 million worth of authorization remained available.
Also, FULT pays regular quarterly cash dividends. The last dividend hike of 6.3% was announced in December 2023. Over the past five years, the company has raised its dividend seven times, with annualized dividend growth of 6.2%. At present, its payout ratio is 40% of earnings.
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Republic First Deal & Other Reasons to Buy Fulton (FULT)
Amid increasing hopes of rate cuts later this year, bank stocks are in the spotlight. But investors should be careful and invest in fundamentally solid banks. So, today, we are discussing one such stock – Fulton Financial Corporation (FULT - Free Report) .
The lender is in the news these days as it acquired Republic First Bank from the Federal Deposit Insurance Corporation (“FDIC”) late last month. Republic First Bank was seized by the U.S. regulators on Apr 26 as it struggled amid a high interest rate regime, which adversely impacted its balance sheet due to high exposure to commercial real estate loans.
Despite taking several measures, including the divestiture of mortgage origination business, headcount reduction and capital infusion, Republic First Bank struggled to remain solvent. Thus, the bank became the first casualty of the regional banking crisis in 2024.
Last year, there were three major bank failures. Silicon Valley Bank and Signature Bank collapsed in early 2023. Silicon Valley Bank was acquired by First Citizens Bancshares, Inc. (FCNCA - Free Report) , while New York Community Bancorp, Inc. (NYCB - Free Report) acquired Signature Bank. Further, in May 2023, First Republic Bank collapsed and was bought by JPMorgan (JPM - Free Report) .
FCNCA took over Silicon Valley Bank’s assets worth $110 billion, deposits of $56 billion and loans totaling $72 billion. The bank also received an available line of credit from the FDIC for contingent liquidity purposes. On the other hand, NYCB acquired $38 billion in assets and assumed $36 billion of liabilities of Signature Bridge Bank, N.A., from the FDIC. Meanwhile, JPM paid $10.6 billion for the bulk of First Republic’s $228 billion of assets and assumed deposits worth $92 billion.
For FULT, the move to acquire Republic First Bank is in sync with the growth strategy of doubling its presence in the Philadelphia market. As part of the deal, the company bought assets of roughly $5.2 billion, which includes an investment portfolio of approximately $2 billion and loans & leases worth almost $2.9 billion.
Moreover, Fulton’s assumed liabilities are worth roughly $5.3 billion, which include deposits of approximately $4.2 billion and other borrowings and liabilities of around $1.3 billion. Also, this will reduce the company’s loan-to-deposit ratio to 92% from 99% and enhance its liquidity profile.
The deal is expected to provide immediate operative leverage via purchase accounting, anticipated cost savings and balance sheet restructuring. The transaction will be accretive to FULT’s 2024 EPS by roughly 20%.
Hence, the financially compelling deal is one of the biggest reasons to invest in FULT stock for solid returns.
Analysts also seem to be bullish about the company’s prospects. Over the past 30 days, the Zacks Consensus Estimate for earnings moved almost 1% and 19.1% upward for 2024 and 2025, respectively. Fulton currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of FULT have soared 11.2% over the past three months against the industry's 0.3% decline.
Image Source: Zacks Investment Research
Here are some of the other factors that make FULT stock worth betting on:
Earnings Strength: Fulton’s earnings witnessed growth of 9.6% over the last three to five years, which compares favorably with the industry average of 6.7%. Though earnings are expected to decline 11.1% this year because of higher funding costs and a tough operating backdrop, the metric will rise 22.9% in 2025.
The company has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 5.49%.
Revenue Growth: Fulton’s revenues witnessed a compound annual growth rate of 5.6% over the last five years (2018-2023). The rise was driven by solid loans and deposit balance and efforts to bolster fee income. The acquisitions completed during the period also supported the top-line growth.
Revenues are likely to keep on improving on decent loan demand, high rates and plans to expand footprint. For 2024, revenues are expected to increase 10.4%, while next year, the metric is projected to rise 4.7%.
Solid Capital Distribution Actions: Fulton’s capital distribution plans seem impressive, through which it is expected to keep enhancing shareholder value. In December 2023, the company’s board of directors approved the repurchase of up to $100 million worth of shares starting Jan 1, 2024, with an expiration date of Dec 31, 2024. As of Mar 31, 2024, approximately $70 million worth of authorization remained available.
Also, FULT pays regular quarterly cash dividends. The last dividend hike of 6.3% was announced in December 2023. Over the past five years, the company has raised its dividend seven times, with annualized dividend growth of 6.2%. At present, its payout ratio is 40% of earnings.