Cadence Bank

CADE Details

Cadence Bank (NYSE: CADE) is a significant regional banking franchise with assets of USD 48 billion and over 400 branch locations in the South, Midwest, and Texas. The company and its insurance agency subsidiary provide commercial banking, leasing, mortgage origination and servicing, insurance, brokerage, and trust services to corporate customers, local governments, individuals, and other financial institutions through an extensive network of branches and offices.

Latest News:

• Share Repurchase Program: CADE launched a new share repurchase program on December 08, 2021, allowing the business to purchase up to 10 million shares of its common stock. This new share repurchase program, which is subject to approval by the Federal Deposit Insurance Corporation, will go into effect on January 03, 2022, and will terminate on December 30, 2022.
• Inorganic Endeavors: CADE announced the successful completion of its previously announced merger on October 29, 2021, in which legacy Cadence Bancorporation merged into BancorpSouth Bank, with BancorpSouth as the surviving entity. BancorpSouth was renamed Cadence Bank after the acquisition was completed.

Q3FY21 Results:

• Flat Interest Income: The company reported a slight decrease of 0.58% in total interest revenue to USD 199.51 million in Q3FY21 (ended September 30, 2021) compared to USD 200.67 million in Q3FY20. Net Interest Margin (NIM) declined by 45 bps YoY to 2.86% in Q3FY21.
• Flat Net Income: The company reported a slight decline in net income to USD 72.73 million compared to USD 73.83 million in Q3FY20.
• Decline in NPLs: Non-Performing Loans (NPLs) edged lower by 30.84% to USD 83.80 million as of September 30, 2021, vs. USD 121.17 million as of December 31, 2020.

Key Risks:

• Geographical Concentration Risk: Alabama, Arkansas, Florida, Louisiana, Mississippi, Missouri, Tennessee, Texas, and Illinois have an intense concentration of the bank's business. Economic conditions in these southeastern states could deteriorate, affecting the company's financial position. Furthermore, as of September 30, 2021, the company's geographic NPL distribution was concentrated in Texas, Mississippi, Alabama, and the Florida panhandle markets.

Valuation Methodology: Price/Book Value Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY22E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

CADE Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

CADE's share price has surged 30.59% in the past six months and is currently trading at a higher band of the 52-week range of USD 24.87 to USD 35.59. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 59.09. We have valued the stock using the Price/Book Value-based relative valuation methodology and arrived at a target price of USD 30.82.

Considering the surge in the stock price, a decline in fundamentals, current valuation, and technical indicators, we believe the decent business fundamentals are adequately reflected at current trading levels. Hence, we recommend a "Sell" rating on the stock at the current price of USD 32.87, up 0.98%, as of January 20, 2022, at 11:02 AM ET.

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

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