Wintrust: A Quiet Regional Bank Posting Loud Results

Key Points

• Wintrust Financial delivered record second-quarter net income, with loan and deposit growth supporting the regional bank’s growth story.
• The stock already reflects much of that execution after a strong multiyear run, making valuation a key question for investors.
• Analysts still see upside, while Wintrust’s growing dividend and conservative payout ratio add to the income-and-growth setup.

Wintrust Financial NASDAQ: WTFC just posted a record quarter with strong loan and deposit growth. Being a mid-sized regional banking company, Wintrust doesn’t get the attention of money-center banks, but maybe that’s why now could be a good time to take notice.

Over the years, the Illinois-based company has quietly built a regional banking franchise that blends traditional community banking with specialty finance, wealth management, and other fee-based businesses. With a series of multistate subsidiaries in Illinois, Wisconsin, and Indiana, the banking company appears to have room to grow.

The question for investors is valuation: How much are they willing to pay for a bank that’s executing well in an industry that can turn quickly?

Record Earnings Put Wintrust’s Core Growth in Focus

Wintrust’s second-quarter results showed a continuing streak of record profitability into the middle of this year.

Revenue rose 10% year-over-year in the three months to $738.6 million, above analysts’ expectations. Adjusted earnings per share came in at $3.30, also comfortably ahead of the $3.15 analysts had expected.

Second-quarter net income hit a record $233.7 million, total loans climbed to $55.7 billion, total deposits reached $61.1 billion, and tangible book value per share rose to $92.13, up from $81.86 a year earlier.

Inside the numbers, net interest income rose 9.3% year over year to $ 597.4 million, while the net interest margin held roughly steady at 3.5%.

The numbers are compelling, as the results continued a string of increasingly higher net income, loans, and deposits. By June 30, the company had $74.7 billion in assets, up from about $23 billion a decade ago.

Strong Results Have Raised the Valuation Bar

The stock valuation question already incorporates the company’s proven execution. Wintrust is large enough to compete within multiple Chicago-area markets and specialty-finance niches. At the same time, it’s focused enough to avoid playing as another generic national bank.

Its blend of business has allowed it to grow without apparently wrestling with worries over deposit pricing, commercial real estate, and slowing loan demand.

While its share price has pulled back occasionally in recent years, mostly in line with the banking sector as a whole, the stock is up 127% over the past five years and more than 14% year to date.

Shares slid slightly after the company announced second-quarter earnings on July 20 as it showed a slight compression of its net interest margin, down four basis points from the previous quarter, and slightly higher expenses in some segments.

Although hitting investor sentiment, the fluctuation did not necessarily signal a trend, and some sell-on-the-news was likely at play in the stock decline.

Analysts Remain Constructive After the Record Quarter

Overall, of the 13 analysts tracking the company, the consensus rating is a Moderate Buy, with nine analysts recommending Buy and four analysts suggesting Hold.

The average price target looking ahead 12 months is $177.77, an upside of 12% from current levels. The highest price target is $192, while the lowest price target is $160.

While not a dramatic gap between current and future levels, the stock has a history of tracking the markets while reflecting growth on its own. Rather than a turnaround story or an outlier, the company is a regional lender with a share value that has earned investor respect. The bank’s strong price-to-tangible book value shows that investors have already priced much of its high performance into the shares.

For investors, Wintrust also carries an annual dividend of $2.20 per share, not an exciting payout, but at a yield of 1.39%, it’s a respectable and consistent showing. After 12 years of annual increases, the payout ratio of just 17.67% seems both conservative and reliable.

Wintrust Still Faces the Usual Regional Bank Risks

Even a steady grower like Wintrust is not without risk. The biggest threat, like with similar regional banks, is that credit and funding conditions can shift faster than investors expect. Wintrust's current numbers look strong, but banking is cyclical, and rates, consumer appetite, real estate, and other macroeconomic issues can change quickly.

Competition adds another layer of pressure. Bank of Montreal NYSE: BMO, Fifth Third Bancorp NASDAQ: FITB, U.S. Bancorp NYSE: USB, Huntington Bancshares NASDAQ: HBAN are just some of the other banking companies in the region.

Wintrust Offers Growth, Income and Execution

Even accounting for those risks, Wintrust has advantages that many regional peers lack: record recent earnings, strong loan and deposit growth, a stable margin, rising book value, and a modest but growing dividend. The bank is both expanding and returning capital to shareholders.

The usual caveats come with any bank stock. But investors seeking a dividend stock with a bit of growth attached, or value stocks with a strong underlying franchise, might want to place Wintrust on their overall income-and-growth watchlist heading into the second half of the year.