By:
Thomas Martinez, 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 (NASDAQ:WTFC) is a financial holding
company that operates 15 community banks serving northern Illinois and southern
Wisconsin areas. The banks offer personal banking, business solutions, mortgage,
and wealth management services. WTFC was founded in 1991 in Lake Forest, IL.
but is now headquartered in Rosemont, IL.
• WTFC is in the midst of
its largest acquiring period ever, with a total of five transactions this year
(four acquisitions, one sale/three closed, two ongoing) currently totaling $181
million, its highest ever total spent on acquisitions.
• The last FY to mimic
such behavior (’04) resulted in an increase of 55.5%, 83.1%, and 30.6% for
interest income, non-interest income, and net income, respectively. The price
plateaued at $62.10 in Dec. ’04, a price that wasn’t reached until Nov. ‘16.
• Management recently
announced, on Oct. 24th 2019, its plans for a $125 million stock
buyback, after its Q3 earnings call revealed a quarterly EPS of $1.69, as
opposed to the consensus of $1.62. This buyback program has the potential to
boost Q4 EPS and inflated the FY’s ending EPS, temporarily driving up share
prices.
Key
points:
Wintrust Financial Corporation is entering a new, more
aggressive, phase in its history. Set to acquire $1.072 billion in assets, $918
million in deposits, and $756 million in loans, WTFC is tightening its grip on
the St. Charles, South Elgin, Geneva, Countryside, Burbank, Darien, Homer Glen,
Oak Brook suburbs of Chicago, as well as the Windy City itself.
Milwaukee subsidiary, Town Bank, recently partnered with
our very own Marquette University, taking over from US Bank, to become the
University’s official banking partner. This deal includes the installment of
ATMs across campus as well as operating the ex-US Bank branch within the Alumni
Memorial Union. Town Bank is also in the midst of opening a new corporate
office in downtown MKE that will become Wintrust’s new Wisconsin headquarters.
This is but one personal example of how Wintrust’s subsidiaries as well are
becoming increasingly aggressive in their expansion.
What
has the stock done lately?
YTD, WTFC’s share price
is down 2.09% but where its real potential for substantial upside lies in the
results of 2020’s FY where the benefits of its recent acquisitions are set to
appear and be reaped.
Past
Year Performance:
Down 11.42%% in value over the span of a
year does not bode well for those who are WTFC’s side, but I remain optimistic
of the future performance of the firm. 2018 was a year where quarterly Net
Income levels expanded at nearly a rate of ~40% per quarter, and to judge WTFC
on this year’s performance alone seems quite unfair, considering its still
admirable performance from its growth in Interest Income and Non-Interest
Income.
Source:
FactSet
My
Takeaway:
I say let’s give this old
timer a nice polishing! Having been pitched to the AIM Small-Cap portfolio on
two occasions, once in 2013 and once in 2014, it has enjoyed its stay and
experiences nice returns from initial prices of $41.07 and $46.57. With the
expected benefits from recent acquisitions and existing regional expansion, I
expect WTFC to continue to grow even more and might even recommend that more
shares of WTFC to be added to AIM’s Small-Cap portfolio.
Source:
FactSet
