Keefe Bruyette downgraded Banc of California (BANC) to Market Perform from Outperform with a $16 price target following 750bps of recent outperformance. Having successfully transformed the balance sheet at legacy Banc of California over the past 4 years, CEO Jared Wolff is on to the next stage with the proposed acquisition of PacWest Bancorp (PACW), which provides a clear pathway to close the profitability gap to peers by Q4 2024, the firm says. Keefe Bruyette thinks this is a good deal for Banc of California, and the market clearly agrees as the stock is up 10% since news of the deal hit. That said, the firm has found that recent deal stocks typically have difficulty re-rating post acquisition, at least in the near-term. Keefe Bruyette believes Banc of California’s multiple may similarly be limited from re-rating, especially with PacWest being a lower multiple stock.
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