Monday, May 06, 2013

Investing in Private Banking

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Zacks Investment Research reports that the broad financial sector has been a strong performer so far in 2013, as it has been leading the market in the year-to-date timeframe. Furthermore, the space has actually been beating out the S&P 500 from a one year look as well, suggesting a pretty strong trend of outperformance for this key market sector.

However, we have begun to see some new trends develop in this corner of the market during the current earnings season as big banks have been having a bit of trouble. Major banking institutions have been doing quite well on earnings, but have seen sluggish revenues, suggesting that they may have a bit of trouble growing in the near future.

For this reason, it may be time to look elsewhere in the financial sector for better growth candidates, and for firms that are better poised to take advantage of current market trends. And with the domestic economy coming back a bit, investors may want to focus on regional banks like Private Bancorp ( PVTB ) for their exposure.

PVTB in Focus

While PVTB was beaten down in the financial crisis, the company is now back on track and a tremendous value. The firm has seen a solid start to 2013, as the stock is up about 18% year-to-date, while its PEG ratio is still well below the industry average at just 1.76.

Furthermore, unlike many of its peers in the space, PVTB could see a very strong performance in terms of earnings growth in the near future. Current expectations call for year-over-year growth of nearly 68% for the current quarter, and an impressive 49% growth rate for the current year.

While this might seem like a lofty target to some, it is important to note that analysts seem pretty confident in the firm’s prospects, as all of the recent estimates have gone up. Furthermore, the consensus earnings expectation for the current quarter and next quarter—as well as the current year and next year—have all gone up in the past 30 days.

This suggests that many are feeling even more optimistic about the company in the near term, and that even better days could be ahead for PVTB. This is especially true when investors consider the firm’s recent history when it comes to earnings surprises; it hasn’t missed in the past four quarters and has actually seen a 22% average beat in the trailing four periods.

Thanks to this confluence of factors, the stock has earned itself a Zacks Rank of 1 or ‘Strong Buy’. The company also has a Zacks Recommendation of ‘Outperform’ as well as an industry rank in the top quarter, meaning that both the short and long term picture are looking quite well for this company.

Other Factors

If this impressive earnings picture wasn’t enough for you, there are a couple of other strong points that could sway you to the bull side for this stock. According to the recent earnings report, net revenues for the company showed growth in the year-over-year period, suggesting that PVTB has been able to avoid some of the top-line growth woes that have impacted its larger counterparts.

Furthermore, there were some other encouraging stats from the company such as its non-interest income increasing 11% year-over-year, thanks to more mortgage banking and syndication fees. The firm also said that total loans grew 9% year-over-year, so PVTB has had little trouble expanding its core business either.

Bottom Line

Financials remain a strong sector in the market, and one that continues to lead the way higher in 2013. There are a number of solid choices in the space though, and investors have largely focused on big banks for their exposure.

However, there are a number of smaller companies that could be better growth candidates in the near future, both from an earnings and revenue perspective. One such firm is Private Bancorp, and thanks to their top Zacks Rank and strong revenue growth, they could make for a great pick for financial-focused investors at this time.