Amid a potential recession in the near term, investors are shying away from investing in bank stocks. However, there are several banks worth considering based on strong fundamentals and prospects. One such stock is Trustmark Corporation TRMK.
Organic expansion efforts, a focus on fee income, decent loan growth and higher rates are likely to keep supporting TRMK’s financials. Further, a solid balance sheet and steady capital deployments are tailwinds.
Trustmark Corporation is witnessing upward earnings estimate revisions, reflecting analysts’ optimism regarding its earnings growth potential. In the past 60 days, the Zacks Consensus Estimate for earnings has moved 11% and 11.3% upward for 2023 and 2024, respectively. TRMK currently sports a Zacks Rank #1 (Strong Buy).
Shares of Trustmark Corporation have dropped 16.7% over the past three months compared with the industry's 17.9% decline.
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Here’s Why TRMK Stock Is an Attractive Pick
Earnings Growth: In the past three to five years, Trustmark Corporation recorded earnings growth of 2.8%. The momentum is expected to continue in the near term. The company’s earnings are expected to rise 5.4% in 2023.
TRMK also has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average surprise being 8.51%.
Revenue Strength: Trustmark Corporation is witnessing a steady improvement in revenues. The company’s top line witnessed a CAGR of 4.5% over the last three years (ended 2022). Robust loans and deposit balances, higher rates and efforts to improve fee income will support revenues.
Management expects net interest income to grow at mid-single-digit rates. Further, insurance revenues are expected to rise in the high-single-digit range, while wealth management income is projected to increase in the mid-single-digit range. Meanwhile, service charges, bank card fees and mortgage banking revenues are expected to remain stable.
Revenues are expected to grow 4.9% in 2023 and 1.2% in 2024.
Solid Loan & Deposit Balance: TRMK remains focused on improving the loan and deposit balance. Over the last three years (2019-2022), loans and deposits recorded a CAGR of 8.6% and 8.7%, respectively. Both witnessed a rise on a sequential basis in the first quarter of 2023 as well.
Management projects loans held for investments to grow in the mid-to-high-single-digit range. Likewise, deposit balances are expected to rise in the mid-single-digit range, driven by promotional campaign activity.
Strong Leverage: Trustmark Corporation’s debt/equity ratio is 0.12 compared with the industry’s average of 0.25. The relatively strong financial health of the company will help it perform better than its peers in a dynamic business environment.
Steady Capital-Deployment Activities: Trustmark Corporation is committed to enhancing shareholders’ value. The company has been steadily paying out 23 cents per share as quarterly dividends.
Based on the last day’s closing price of $22.96, the company’s quarterly dividend currently yields 4.2%. This is impressive compared with the industry’s average of 2.82% and attractive for income investors as it represents a steady income stream.
Also, TRMK has a share repurchase program in place. As of Mar 31, 2023, $50 million worth of authorization remained available. The plan expires on Dec 31, 2023.
Other Banks Worth Considering
A couple of top-ranked bank stocks are Pathward Financial, Inc. CASH and First Citizens BancShares FCNCA.
The Zacks Consensus Estimate for Pathward Financial’s current-year earnings has been revised 1.8% upward over the past 60 days. Its shares have risen 15.9% in the past six months. Currently, CASH carries a Zacks Rank #2 (Buy).
First Citizens BancShares currently sports a Zacks Rank #1. Its earnings estimates for 2023 have been revised 67% upward over the past 30 days. In the past six months, FCNCA shares have surged 63.3%. You can see the complete list of today's Zacks #1 Rank stocks here.
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