Merchants Bancorp Q3 net income jumps 92% on valuation gains

Overview

• U.S. diversified bank's Q3 net income rose 92% yr/yr and 34% sequentially

• Q3 diluted EPS increased 112% yr/yr and 39% from prior quarter

• Results boosted by higher servicing rights and derivative valuations amid higher interest rates

Outlook

• Company expects elevated operating expenses and possible earnings dilution from recent acquisition ramp-up

• Company says acquisition may be dilutive initially but is expected to support earnings growth over time

• Company expects acquisition to expand mortgage production and create opportunities for gain on sale revenue

Result Drivers

• VALUATION GAINS - Co said positive fair value adjustments to servicing rights and floor derivatives boosted noninterest income

• NONINTEREST INCOME - Co attributed earnings growth to higher noninterest income, mainly from loan servicing fees and other income

• LOWER FUNDING COSTS - Co said lower interest expense on certificates of deposit contributed to improved net interest income

Company press release:

Key Details

Analyst Coverage

• The current average analyst rating on the shares is "hold" and the breakdown of recommendations is 1 "strong buy" or "buy", 2 "hold" and no "sell" or "strong sell"

• The average consensus recommendation for the banks peer group is "buy."

• Wall Street's median 12-month price target for Merchants Bancorp is $64.00, about 28.7% above its October 27 closing price of $49.72

• The stock recently traded at 8 times the next 12-month earnings vs. a P/E of 9 three months ago

Reuters Recommended Reads

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(This story was created using Reuters automation and AI based on LSEG and company data. It was checked and edited by a Reuters journalist prior to publication.)