On Wednesday, Piper Sandler adjusted its stance on Independent Bank Group (NASDAQ:IBTX) stock, downgrading from Neutral to Underweight. The firm also reduced the price target to $38.00 from the previous $48.00. This change reflects concerns about the bank's near-term profitability amid the current interest rate environment.
The analyst from Piper Sandler noted that Independent Bank (NASDAQ:INDB) Group's deposit costs increased by 19 basis points in the first quarter of 2024, and the expected net interest margin (NIM) improvement has been delayed by another quarter. Despite recognizing the bank's high-quality credit book and well-regarded management team, the analyst expressed the view that the bank is not well-positioned for the prevailing rate conditions.
The report further elaborated that while Independent Bank Group's earnings should improve eventually, due to its high sensitivity to net interest income (NII) growth, this improvement is now anticipated to be a potential event in 2026 rather than 2025. In the interim, the bank is expected to underperform its peers in terms of pre-provision net revenue (PPNR) and overall profitability.
The analyst concluded that shares of Independent Bank Group are likely to lag behind those of its peers over the next 12 months. Investors are advised to look for certainty into the bank's fourth-quarter 2025 run-rate and its earnings potential for 2026. Nevertheless, the report suggests that if and when interest rates do decline, Independent Bank Group should be able to recover ground swiftly.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.