Higher rates for longer could benefit WSFS Financial , the Delaware-based parent of Wilmington Savings Fund Society, according to D.A. Davidson. The firm upgraded the regional bank to buy from neutral on Monday with a $45 per share price target, representing about 28% upside from Friday’s $35.17 close. Shares of WSFS Financial have slumped roughly 18% from the start of the year amid pressure on regional banks as lenders are forced to pay more for deposits. WSFS YTD mountain Shares of WSFS Bank have slipped more than 18% in 2023. But analyst Manuel Navas says WSFS could post stronger growth compared to peers thanks to a higher net interest margin . At the same time, he says, WSFS is trading at a discount that doesn’t accurately capture the bank’s position. “…[M]ore certainty on the rate and bank operating environment makes us increasingly bullish that shares can outperform and trade at a higher multiple driving our new BUY rating and our price target increase (+$7 to $45 implying 28% upside),” Navas wrote in a note to clients. Navas added that the bank’s elevated net interest margin, which he says has risen 124 basis points year-over-year, will underpin WSFS’s ability to outperform peers despite higher deposit costs across the industry in an elevated interest rate environment. WSFS’s “strong asset sensitivity has expanded loan yields well ahead of lagging deposit cost rises with some catchup pressuring 1Q23 NIM (-24bp Q/Q to 4.25%),” Davidson said. “However, our NIM forecast stays elevated on above-peer asset yield betas that match historical outperformance (~50% at WSFS vs. peers at ~28%) driven by ~55% of loans being variable and a low 75% [loan-to-deposit] ratio that offers positive mix shift benefits as securities runoff.” — CNBC’s Michael Bloom contributed to this report.
