WesBanco, Inc. (NASDAQ:WSBC) stock hit a 52-week high in late 2022, when the bank holding company reached over $41 per share. Since then it’s been nothing but bad news, with the share price plummeting by 46%.
The banking industry has been rocked by the failures of Silicon Valley and First Republic Banks, and they are largely behind the 40%+ drop WSBC has experienced year-to-date. The industry’s issues have caused some solid banking institutions to be unfairly grouped with their underperforming peers.
WesBanco seems to be one of those institutions. With the company’s most recent earnings announcement, WSBC reported an almost 12% increase in loans from the same time last year. And the company offers a very attractive 6.9% annual dividend yield, paying out a dividend of $0.35 per share. That’s a 3% dividend increase year-over-year (YOY).
But short-term turmoil isn’t going anywhere anytime soon. Increasing interest rates, heavy inflation, and declining customer confidence in the industry are going to affect the stock for the foreseeable future. And despite the loan growth, these external factors have caused a marginal decline in the bank’s revenue over the past few years.
So is Wesbanco stock a buy?
WesBanco is a multi-state corporation with 212 branches and a $1.33 billion market capitalization that has become the second-largest WV-based bank.
The company’s most recent purchase in 2019 of Old Line Bank expanded its reach into Maryland and created a combined company with over $15 billion in total assets. With six states currently in the fold, WesBanco is now eyeing additional expansion into Kentucky and Indiana.
With all the growth, the bank has still been able to maintain its community-first approach. In March of this year, Forbes named Wesbanco #10 on its 2022 ranking of the Best Banks in America. The list is created by evaluating key metrics like the growth, stability, liquidity, and Return on Assets (ROA) of each major bank. It was the company’s third consecutive year on the list, and the company’s thirteenth ranking since the list started in 2010.
In addition, Forbes named Wesbanco as one of the 2022 Best Midsize Employers in America. This ranking was created by surveying a large sample of employees about their work environment, and how willing they would be to recommend the company to a friend. Out of the 30 banking/finance companies on the list, Wesbanco was ranked #2.
WSBC Q1, The Good, Bad & Ugly
Net income was down around 4% year-over-year from $41.6 million to $39.8 million. This was due to inflation and rising interest rates in the sector. Diluted earnings per share were also down from $0.68 last year to $0.67 in the first quarter.
Loan growth of around 11.9% year-over-year was a major positive for the quarter, representing a 7% annualized increase from December 2022. The average deposit size of $27,000 is a sign that the bank’s customers have faith in the stability of the company, despite the industry’s struggles.
WesBanco has a 1% ROA. That’s an important measure of profitability in the banking industry, where it can be harder to determine a company’s value. Even though the value may seem small, it’s important because it’s still better than the industry average, which declined in the 1st quarter.
The stock also has a healthy P/E ratio of 7.52. The price-to-book value is a very attractive .055, with both indicators pointing to the fact that WesBanco is undervalued.
Even if revenue and net income are down slightly, solid loan growth and positive financial indicators mean that WSBC has been unduly affected by the negativity in the banking industry.
WesBanco Vs Peers
Will those negative trends could have a lasting impact on the company? Silicon Valley Bank and First Republic Bank have had well-publicized failures this year that have sent the industry reeling. Investors worry that fearful customers might initiate a run on the bank.
That sort of run is what led to SVB’s demise. The bank catered to a very specific set of tech-oriented clients, and when those clients fell on hard times they started withdrawing their money. Because SVB had tied that money up in poor investments, it wasn’t able to meet the demand for withdrawals when its customers made a run on the bank.
WesBanco is not in the same situation. In WSBC’s 1st quarter earnings call, the company assured investors that it’s well-diversified and well-capitalized. The company is not catering to any specific industry, even if it does have some loan concentration in Commercial Real Estate. The bank’s leadership pointed to the company’s long history of credit and risk management.
Despite these reassurances, investors didn’t immediately respond to the positive earnings report. WSBC shares are down around 23% over the past 30 days.
Will WesBanco Recover?
WesBanco, Inc. is a bank holding company that includes over 200 banks in the states surrounding its West Virginia headquarters.
WSBC has been repeatedly selected as one of the best banks in America, due to its customer-centric focus. Its positive work environment means its employees are able to focus on forging better relationships with the bank’s clients.
Unfortunately, the well-managed bank has been unfairly affected by rising interest rates, inflation, and investors’ fears about the industry. Volatility is very likely to continue over the rest of the year. But with the stock trading around $20 and the chance that it could drop even lower, long-term investors should seriously consider a position in the company.
Barring other major industry pitfalls, WesBanco is poised to take advantage of its healthy portfolio and reward its shareholders in the long term. Add in the fact that the stock pays a healthy dividend that has been consistently on the rise, and WSBC looks like a winner.
Is WesBanco A Buy?
According to 7 analysts, Wesbano fair value sits at $30.14 per share, with a range that spans from $26 to $33 per share. That translates to 25.0% upside potential from the current share price level. In short, Wesbanco is a buy.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.