HomeMarket NewsSmall CapsFirst Guaranty Bancshares Inc: Analyst Downgrades FGBI Stock, Citing Sluggish Profitability and...

First Guaranty Bancshares Inc: Analyst Downgrades FGBI Stock, Citing Sluggish Profitability and TCE Ratio Decline

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Piper Sandler analyst Graham Dick downgraded First Guaranty Bancshares Inc (FGBI) to Underweight from Neutral, setting a lowered price target of $9.50 from $12.00.

The downgrade stems from continued pressure on the company’s fundamentals, with Q3 FY23 revenue reported at $22.934 million, surpassing the consensus of $20.689 million. However, the EPS of $0.10 missed the consensus of $0.16.

Key points of concern include an 18% Y/Y decrease in core revenues and a 12% Y/Y increase in core expenses in Q3, significantly impacting the company’s profitability profile. The analyst anticipates limited improvement in return on assets until mid/late 2025, as the net interest margin (NIM) expansion is expected to be counteracted by normalization in the provision line.

The NIM is projected to be 2.44% for Q4 FY23, 2.71% for Q4 FY24, and 2.97% for Q4 FY25. Loan growth is estimated at approximately 10.5% in FY24 and 11.5% in FY25, with the tangible common equity (TCE) ratio expected to decline to around 5% by FY24 and 4.75% by FY25, raising concerns about late-cycle growth and incremental pressure.

In light of these projections, the analyst has revised the EPS estimates, lowering them to $0.74 from $0.75 for FY23 and to $0.36 from $0.72 for FY24. However, a recovery is anticipated in FY25 with an expected EPS of $0.90, driven by projected earnings recovery on FFR relief.

First Guaranty Bancshares Inc (FGBI) shares are currently trading 0.91% lower at $9.80.

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