First Interstate BancSystem Inc.

First Interstate BancSystem Inc. (NASDAQ: FIBK) is a community banking-focused financial and bank holding corporation. Individuals, businesses, and others in the Company's market areas can access a variety of banking products and services, including online and mobile banking, through its banking subsidiary, First Interstate Bank.

Latest news

• Completion of merger with Great Western Bancorp, Inc.: As on February 1, 2022, the merger was announced to be complete with conversion of bank systems and branches to occur in May 2022. Each GWB stockholder received 0.8425 shares of FIBK, and the total transaction value was reported as $ 2billion.
• Quarterly release date: Roku Inc. announced to release its Q1, 2022 report on 28^th April 2022.
• Insiders share sale: Over the last quarter, insiders sold 21,634 shares of company stock worth $841,767 including Director's sale of $195,000 value. Corporate insiders now control 21.99 percent of the company.

Q4FY21 results

• Increased top line results: Revenue for the last Q4 increased by 8.95% to US$ 163.2 million YoY. While diluted and basic earnings per share was US$0.83 as compared to US$ 0.76 a year ago. For the full year revenue decreased by 3.57% to US$ 656 million while diluted EPS was US$3.11 compared to US$ 2.53 a year ago.
• Cash and Debt position: As of December 31, 2021, the company had cash & cash equivalents of US$ 8.852 billion almost 40% hike than previous year, while FIBK doesn’t have any long-term debt on its balance sheet.
• Key ratios analysis: Net interest margin for Q4, 2021 was 2.69% compared to industrial average of 2.97%. In contrast, in terms of efficiency, NIBK has a better efficiency ratio of 64.2% as compared to 61.3% industrial average.

Source: Company Filing

Key Risk

• Interest rate risk: Risk can arise for FIBK from adverse movement of interest rates affecting bank’s banking book positions as interest rate changes leads to change in present value and timing of future cash flows.
• Credit risk: As of December 31, 2021, non-performing assets decreased by 20.6% since last quarter. But moving forward Fed hawkish view on interest rates can affect this moving forward.
• Operational and liquidity risk: Operational risk arises from the failure of business procedures in the bank's day-to-day operations. Payments to the wrong account or executing an improper order when trading in the markets are examples of operational risk. The danger that the bank will not be able to satisfy its commitments if depositors come in to take their money is known as liquidity risk. Both the risks are very important in case of FIBK.
• Government rules or policies that are new or have changed. Capital requirements that are stricter, as well as changes in accounting rules.

Outlook

FIBK is expected to continue of the dividend payout policy making it attractive for the investors searching for regular income in addition to the capital appreciation. The dividend yield of 4.61% make FIBK one of the top institutions with such a high yield. Furthermore, after the acquisition of GWP, with more market share, revenues are expected to increase for the 1^st quarter of 2022.

Technical Analysis

FIBK has been in a bearish movement since making the all-time high of $51.24 in March 2021. This year also has not been that good for FIBK share correcting more than 16% since the starting. Price has in March taken multiple rejections from the short term (50-day) SMA. Current market price is $34.84, it may come to $34 to form double bottom as well as bullish divergence on RSI, afterwards showing signs of bullish momentum.

Technical Price Chart (as on April 22, 2022). Source: REFINITIV, Analysis by Kalkine Group

Valuation methodology: Price/book Value based relative valuation method

Source: REFINITIV, Analysis by Kalkine group

Stock recommendation

FIBK stock has fallen around 16% in this year and is currently at levels last seen in November 2020. We have valued the stock using the Price/ book value based relative valuation method and arrived at target valuation of US$ 37.31.

Considering the correction in the stock price, good previous financial years, positive forward outlook, associated risks, fundamental and technical analysis. We recommend a “Hold” rating on the FIBK stock at the closing market price of US$ 34.65, on 22^nd April 2022.

Technical analysis summary

Source: REFINITIV, Analysis by Kalkine group

* Closing market price as on April 22, 2022

Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario. 

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.