It's a good time to buy shares of underperforming Beneficial Bank, the largest lender still based in Philadelphia, argues Frank Schiraldi, bank analyst at Sandler O'Neill + Partners, New York.
Despite the company's slow growth and a Justice Department investigation into whether the bank has discriminated against groups of city borrowers by not offering them home loans, Schiraldi says Beneficial's low share price is bound to rise "20%+," to a price approaching $13 a share, once the investigation is settled and Beneficial moves toward its long-expected full conversion from a depositor-owned mutual to a publicly-held stock company -- which may attract a larger bank to buy the company and its local branch network.
"If investors wait for the completion of the investigation, the stock will have already [risen]," Schiraldi wrote. He says his firm has "significantly increased our expectations of the price" Beneficial will get if it overcomes legal challenges and gets the rest of its stock on the market by the end of this year. The way Beneficial keeps buying back its shares to keep them from falling lower, and has reduced its loan losses to the point where it might be able to start expanding again, should also encourage investors, Schiraldi concluded.