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mid-cap

Book Profits on This Mid-Cap Banking Stock – ONB

Feb 16, 2022 | Team Kalkine
Book Profits on This Mid-Cap Banking Stock – ONB

Old National Bancorp

Old National Bancorp (NASDAQ: ONB) is the holding company for Old National Bank, which has 162 locations around the United States. Commercial and consumer loan and depository services, private banking, brokerage, trust, investment advising, and other standard banking services are among the company's offerings.

Why should investors Book Profits?

  • Decline in Net Interest Margin (NIM): The company has reported a decrease in net interest margin to 2.89% in FY21 from 3.18% in FY19. Compared to the industry median of 3.21%, it also operates at a lower margin. When interest rates rise, loans become more expensive, making savings a more appealing option, and net interest margins fall.
  • Fall in Deposits Growth: The company reported a decrease in deposits growth of 9.0% in FY21 vs. 17.1% in FY20, indicating problems in liquidity management.
  • Drop-in Loans: The company reported a 1.34% decline in total loans to USD 13.60 billion as of December 31, 2021, compared to USD 13.79 billion as of December 31, 2020, which could impact the asset side of the company's balance sheet.

Valuation Methodology: Price/Book Value Multiple Based Relative Valuation

 (Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

ONB share price has surged 13.91% in the past six months and is currently trading in the higher-band of the 52-week range of USD 15.53 to USD 21.28. We have valued the stock using the Price/Book Value-based relative valuation methodology and arrived at a target price of USD 17.11. Considering the company's fall in deposits and loans, net interest margin, and current valuation, we recommend a "Sell" rating on the stock at the closing price of USD 18.92 as of February 15, 2022.

 Three-Year Technical Price Chart (as of February 15, 2022). Analysis by Kalkine Group

* All forecasted figures and Industry Information have been taken from REFINITIV.

* The reference data in this report has been partly sourced from REFINITIV.

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Disclaimer-

Kalkine Equities LLC provides general information about companies and their securities. The information contained in the reports, including any recommendations regarding the value of or transactions in any securities, does not take into account any of your investment objectives, financial situation or needs. Kalkine Equities LLC is not registered as an investment adviser in the U.S. with either the federal or state government. Before you make a decision about whether to invest in any securities, you should take into account your own objectives, financial situation and needs and seek independent financial advice. All information in our reports represents our views as at the date of publication and may change without notice.

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