By:
James F. Oddo, AIM Student at Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by
myself, and it expresses my own opinions. I am not receiving compensation for
it and I have no business relationship with any company whose stock is
mentioned in this article.
Summary:
• Wintrust Financial Corporation (NYSE:WTFC) operates as a bank
holding company, which engages in the provision of banking and financial
services in the Midwest of the United States.
• WTFC’s Net Income is up
3.9% on its $247.6 million total. This was determined by higher deposit and
loan growth, sensible expense tendencies, and higher mortgage proceeds.
• Total loans at quarter
end was at $23.1 billion, up 2.3% quarterly and 10.6% year over year.
• Management stays
attracted to the idea of diffidently extending the duration of the securities portfolio
over a period of time; the goal is to not be aggressive without a move volatile
yield curve. It can be expected for Wintrust to continue to progressively add
longer duration securities at its conservative pace.
.
• Wintrust Financial
Corporation continues to find and execute on small acquisitions.
Key
points:
Wintrust took quite a hit this October, but it remains
profitable and growing in its industry. Management will continue to reiterate
its goal to lower the loan to deposit ratio over the next few quarters. While
this will continue to bring in higher deposit costs, they will be manageable as
Wintrust continues to use this new liquidity to bring in loans or longer
duration securities.
Management recapped that
they are looking at numerous profitable options to decrease their processing
expenses, which could be helpful for the future of their production margins.
With management’s views on expenses, apart from revenue and growth associated
expenses, there is no expectation for any noteworthy pressures. The net result
should be a well put together fundamental position for the company over the close
to medium period.
Management does have
expectations for some reduction in mortgage volumes in quarter 4, but this is
only due to ordinary cyclical trends and higher mortgage rates. The overhead
ratio dropped to 1.53% from 1.57% in the previous quarter. Additional
noteworthy trends were a 13 bps growth in earning asset yields, however this
was balanced out by a 22 bps growth in deposit costs and a 17 bps growth in
interest bearing liability costs. It can be expected for the quarter 4 earnings
call to concentrate on their future successes and goals in loan growth, mortgage
volume, and a big picture view of their acquisition growth opportunities for
the coming years.
What
has the stock done lately?
Year to date, Wintrust
Financial Corporation is down .91% and down 13.47% on the last 3 months. This
is due to the correct period this October. From December 2017 to the end of
September 2018, was up 8.98%. This was due to WTFC’s excellent revenue growth
in its commercial banking division. Now that we are out of the correction
period, it can be expected for WTFC to get back on track with its strong
growth.
Past
Year Performance:
WTFC has decreased .91% in value over the
past year, but the stock should still be considered for a buy. WTFC's market
valuation implies a 2 year target price of $92/share, resulting in a 16%
upside.
My
Takeaway:
Wintrust Financial
Corporation has a definitive presence of revenue share in the United States,
sitting at 4% and growing. WTFC is worth adding to a portfolio due to the
correct period this October, leaving the share price undervalued. Due to the
positive trends in loan growth, as well as management’s goals for lowering
processing expenses Wintrust will rally and get over the hit it took during
October.
