By Yifang (Evonne) Liu
PrivateBancorp Inc. stock closed at $54.15 after the company reported strong earnings, reinforcing shareholder expectations that the prospective acquisition by Canadian Imperial Bank of Commerce will occur at a higher price than the $47 agreed on seven months ago.
“The Big thing is the CIBC acquisition is still pending. Shareholders vote date hasn’t been determined yet. Unless CIBC comes back to the table with a better price, I don’t think the proxy advisory firms recommended a vote for the deal,” said Jared Shaw, senior analyst of Wells Fargo Securities LLC. “CIBC has to adjust the price, since shareholders are going to demand a price that is reflective of the improvement of profitability, given the higher rate environment.”
PrivateBancorp reported net income of $59.5 million, or 73 cents per diluted share, for the fourth quarter 2016, compared with $52.1 million, or 65 cents per diluted share, for the fourth quarter 2015, beating analysts’ estimate by 7 cents per diluted share, according to the consensus compiled by Bloomberg.
As of Dec. 31, 2016, Chicago-based PrivateBancorp had 35 offices in 13 states and $20.1 billion in assets.
“Through the continued successful execution of our business development efforts, and with the benefit of a rising rate environment, we achieved annual double-digit growth in loans, deposits, revenue and net income as we continued to deliver value for our clients and stockholders in 2016,” said Larry D. Richman, president and chief executive officer, in a press release.
Total loans grew to $15.1 billion, up $1.8 billion from a year ago and $401.7 million from Sept. 30, 2016. The growth is driven primarily by activity in commercial and commercial real estate loans, according to the company’s press release.
Total deposits were $16.1 billion, increasing $1.7 billion from a year ago and $576.4 million from Sept. 30, 2016.
At Dec. 31, 2016, commercial loans represented 64 percent and commercial real estate and construction loans represented 30 percent of total loans, relatively consistent with the comparative periods.
Net interest income grew to $155.4 million in the fourth quarter, increasing 14 percent from the fourth quarter 2015 and 7 percent from the third quarter 2016, primarily driven by growth in average loans of 13 percent compared to fourth quarter 2015 and 4 percent compared to the third quarter 2016.
Noninterest income was $39.4 million in the fourth quarter 2016, increasing $6.8 million from the fourth quarter 2015 and $1.8 million from the third quarter 2016.
Total interest expense and total non-interest expense increased 27.6 percent and 15.4 percent respectively from the same quarter last year.
Shaw said he was not too concerned about the higher expenses since there is a cost associated with the acquisition and it is still an efficient company with the efficiency ratio coming down.
On June 29, 2016, CIBC agreed to buy PrivateBancorp in a deal valued at $3.8 billion, but a surge in PrivateBancorp’s performance and rising prices of other bank stocks have meant that shareholders now find the Canadian bank’s offer unsatisfactory, so a special meeting of stockholders to vote on the transaction, originally scheduled for Dec. 8, 2016, was postponed to an undetermined date.
For the year ended Dec. 31, 2016, the Company had net income of $208.4 million, or $2.57 per diluted share, compared with $185.3 million, or $2.32 per diluted share, for the year ended Dec. 31, 2015.
Given the improved performance, Shaw wrote in his note that Wells Fargo Securities raised its earnings estimate to $3.00 per share from $2.76 for 2017, estimated $3.45 per share for 2018, and revised its target price for the stock to a range of $55 to $56 to reflect an expectation of a better bid from CIBC.
