BancorpSouth Bank

BXS Details

BancorpSouth Bank (NYSE: BXS) is a Mississippi-based regional bank with USD 27.6 billion in assets as of June 30, 2021. Through an extensive network of branches and offices, the business provides commercial banking, leasing, mortgage origination and servicing, brokerage, and trust services to corporate customers, local governments, individuals, and other financial institutions. BXS is divided into five segments: 1) Banking Services Group (BSG); 2) Mortgage; 3) Insurance Brokers; 4) Wealth Management; and 5) General Corporate and other services. The BSG division accounts for the majority of the company's revenue.

Receipt of USD 50.0 Million in Tax Credit Grant: BXS Community Fund, LLC, a BXS subsidiary, was granted a USD 50 million New Markets Tax Credit (NMTC) allocation on September 14, 2021, which would stimulate investments and economic growth in low-income urban and rural regions. The funding will be used on high-impact projects focused on manufacturing and industrial businesses, offering healthcare amenities to underserved communities, and health-focused groceries.

Approved Merger with Cadence: During a special meeting held on August 09, 2021, BXS shareholders approved its merger with Cadence Bancorporation. The acquisition, which was initially announced in April 2021, will conclude in Q4FY21, with the combined company having a market value of over USD 6 billion.

H1FY21 Results: The company reported a slight increase of 4.40% in net interest revenues to USD 352.97 million during H1FY21 (ended June 30, 2021) compared to USD 338.10 million during H1FY20, due to a decrease in total interest expenses. Its net income (attributable to common shareholders) rose to USD 152.35 million during H1FY21 compared to USD 80.68 million during H1FY20. As of June 30, 2021, BXS recorded a 15.08% sequential growth in total deposits to USD 22.84 billion vs. USD 19.85 billion at FY20 end, with total Non-Performing Loans (NPLs) declining 30.33% to USD 84.42 million. In addition, Net Interest Margin (NIM) for H1FY21 decreased by 37 bps YoY to 3.07% (on a fully taxable equivalent basis).

Key Risks: Operations in Alabama, Arkansas, Florida, Louisiana, Mississippi, Missouri, Tennessee, Texas, and Illinois account for most of the bank's business. As a result, deterioration in economic conditions in these regions could impact its financial position. Furthermore, BXS's geographic NPL distribution is mainly focused on its Texas, Mississippi, Alabama, and Florida Panhandle regions (as of June 30, 2021).

Valuation Methodology: Price/Book Value Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

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

BXS Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: BXS's share price has increased 38.71% in the past twelve months and is currently leaning towards the higher-end of the 52-week range of USD 21.12 to USD 35.59. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 66.44. We have valued the stock using the Price/Book Value-based relative valuation methodology and arrived at a target price of USD 32.96. Considering the surge in the stock price in the past twelve months, a decline in NPLs, inorganic growth initiatives, robust balance sheet, and associated risks, we recommend a "Hold" rating on the stock at the current price of USD 30.85, up 1.58% as of October 07, 2021, 12:56 PM ET.

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

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