Customers Bancorp, Inc. (CUBI, $56.68): “CUBI, the company that operates in 2030”
By: Matthew
O’Brien, AIM Student at Marquette University
Summary
• Customers Bancorp, INC. (NYSE:CUBI) provides financial products and
services such as mortgage and SBA lending for commercial, institutional, and
individual clients in the United States.
• CUBI has capitalized off SBA
loans by being a top 15 lender of PPP loans
• CUBI has began using Customers
Bank Instant Token (CBIT), which provides blockchain-based digital payments in
real time, 24/7/365.
• Management has announced
partnerships with premier cryptocurrency and digital asset institutions such as
Genesis Global Trading and SFOX.
• CUBI is currently trading at
$56.68 near all-time highs of $61.48 as they’ve adapted a digital approach faster
than their peers and capitalized after COVID.
Key
points: Customers Bancorp, Inc. is attempting to hop on the
cryptocurrency trend by creating a proprietary digital payment system that
operates on the blockchain. Doing so would allow clients to always send and
receive USD payments, which would benefit the clients through improved speed
and security and benefits the company through low-cost deposits which can
increase their margin. If customers of CUBI were to adapt this payment system,
it can possibly be used by other businesses in the future.
Prior to the pandemic, CUBI had operated
digitally through online checking and savings accounts. They also operated in
the mortgage and commercial lending space. After COVID’s relief allowed banks
to disburse PPP loans, which are government-secured forgivable loans, in
response to COVID, CUBI aggressively marketed their loan services which gained
them a lot of new customers as the PPP was the first time many people
experienced an emergency loan program. CUBI was top 15 in terms of the amount
of loans disbursed among all banks.
Customers Bancorp announced their
newly added institutional clients that specialize in digital asset classes and
cryptocurrency investment. Customer Bancorp wants to specialize in business-to-business
payment options for commercial real estate, healthcare, insurance, and more
areas in which these clients part take in. Head of digital banking at CUBI
believes the number of cryptocurrency clients will increase over the next few
years and these clients are ready to embrace it. As we’ve seen this last year,
cryptocurrencies are becoming more relevant, and companies are beginning to
adopt them as payment methods and investments. By investing in the
cryptocurrency space early, CUBI is able to get ahead of their customers as
they are more poised for future growth.
CUBI has readily adapted to the
environment that is being digitalized around us. Cryptocurrency is a trending
topic and using a proprietary digital payment system using the blockchain will
allow the company to expand their margins while benefiting their customers. For
these reasons, CUBI has recently reached a new all time high of $61 before
trading at $56.68 as of 12/1 close.
What
has the stock done lately?
Since the March 2020 lows, CUBI
has rallied from $8.90 to its current near all time high price of $56.68. This
can be contributed to PPP loans along with providing digital services as people
adapted to COVID. The government distributed nearly $1.8 trillion in PPP loans
with CUBI taking advantage of the opportunity. Over the last year, CUBI has
seen steady gains with a recent positive catalyst due to their third quarter
earnings. Investors have recently let the stock consolidate in the range of
$56-61 as there have been no new updates in operations. Because the stock is
hovering near highs, it will take time for investors to decide whether the
stock should go higher or not.
Past
Year Performance: CUBI has increased 218.61% in value over the past
year, however the stock is still under its relative value to competitors. While
CUBI operates at a PE ratio of 7.42, its competitors are operating near a
10.46x price to earnings. CUBI has shown investors they are looking to improve
their value through investment in the future. CUBI (blue line) has deservedly
outperformed the Russell 2000 index (purple line) by a very fair amount. The
past year has shown great strength in the direction CUBI is headed, and if they
continue to invest in the future they will continue to outperform the broader
market.
My
Takeaway
CUBI’s head of digital banking is
willing to invest in growing spaces and take advantage of them as well. I think
that the addition of their cryptocurrency clients show investors they ae not a
traditional bank and are following the fast paced environment we’re in. While
their stock has increased a great amount since its COVID lows of below $9, I
think the fact that they still have a low relative PE ratio justifies a further
increase in their stock price.
