Markets

BancorpSouth Reflects Expense Control: Time to Hold?

A generic image of a person holding dollar bills.
Credit: Shutterstock photo

On Sep 18, 2015, we issued an updated research report on Southeast-based BancorpSouth, Inc.BXS . This commercial banking and financial services provider has recorded a year-to-date return of 5.7%.

We believe this growth story has been aided by the company's prudent expense control among several other positives including a strong capital position, steady capital deployment activities and strategic acquisitions.

Successful efforts toward expense management have been reflected by BancorpSouth. The company's non-interest expenses declined at a 3-year compounded annual growth rate ('CAGR') of 2.8% in 2012-2014. Though the company is anticipated to incur ongoing and recurring costs related to BSA and AML programs of around $3 million annually, pension expense is predicted to increase $7 million year over year in 2015 and legal expenses are expected to increase, management noted that an expected decline in other real estate (ORE) expenses in 2015 will support earnings. Therefore, prudent cost control will likely boost the company's bottom-line growth in the upcoming quarters.

BancorpSouth's long-awaited merger deals with Central Community Corporation and Ouachita Bancshares Corp. were delayed for the second time in June 2015. Still subject to regulatory approvals, the deals are expected to close in December 2015. Though recurring postponement hints at compliance-related issues, the mergers will likely prove beneficial to the company's growth upon completion.

At the same time, BancorpSouth's financials exhibit improving credit metrics and a healthy liquidity position. Moreover, a shareholder-friendly approach instills investors' confidence in the stock.

However, organic growth prospects remain bleak. Amid a prolonged low interest rate environment, BancorpSouth's net interest margin is shrinking. Moreover, non-interest income, which forms nearly 40% of BancorpSouth's revenues, exhibits a downtrend.

For 2015, the Zacks Consensus Estimate remained stable at $1.47 per share over the past 30 days. It moved down by a penny to $1.65 per share for 2016. BancorpSouth currently holds a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Some-better ranked stocks in the finance sector include Capital City Bank Group Inc. CCBG , Customers Bancorp, Inc. CUBI and CenterState Banks, Inc. CSFL . All three stocks sport a Zacks Rank #1 (Strong Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

CENTERSTATE BNK (CSFL): Free Stock Analysis Report

BANCORPSOUTH (BXS): Free Stock Analysis Report

CAPITAL CITY BK (CCBG): Free Stock Analysis Report

CUSTOMERS BANCP (CUBI): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

CCBG CUBI

Other Topics

Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More