On Monday, Keefe, Bruyette & Woods adjusted their financial outlook for Metropolitan Bank Holding Corp (NYSE:MCB), reducing the stock price target from the previous $66.00 to $55.00. Despite this change, the firm maintained an Outperform rating on the bank's stock.
The revision follows Metropolitan Bank's recent decision to completely withdraw from its Banking-as-a-Service (BaaS) operations. The exit from BaaS is expected to impact the bank's earnings per share (EPS), prompting the analyst to revise the EPS estimates downward to $6.09 for 2024 and $7.14 for 2025, from the previous estimates of $6.44 and $8.07, respectively.
The discontinuation of the BaaS business is seen as a significant setback in terms of earnings. However, the analyst noted that the BaaS segment had been a major contributor to the bank's earnings volatility over the past two years. The expectation is that exiting this line of business will likely lead to reduced volatility and lower long-term regulatory and risk management costs.
Despite the reduction in earnings estimates and the price target, the analyst's perspective on Metropolitan Bank's stock remains positive. The firm emphasizes that even after the BaaS exit, Metropolitan Bank is projected to achieve a return on tangible common equity (ROTCE) between 10-11% based on a robust tangible common equity (TCE) of 9%.
The new stock price target of $55.00 is based on 85% of the forward tangible book value (TBV) and reflects a forward price-to-earnings ratio (P/E) of 9 times the estimated earnings for 2024 and 8 times for 2025. The analyst reiterates the Outperform rating, signaling confidence in the stock's potential performance despite the recent strategic shift.
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