Summary
After a multiyear run of lackluster relative performance, Fulton is looking forward to loan growth, asset sensitivity, cost reductions, and possible M&A to drive improved earnings growth.
The BSA/AML compliance issue has dragged on and on, but management's efforts to improve its lending capabilities are paying off and M&A offers potential value creation.
Fulton is not particularly undervalued for what it is today, but positive developments on spreads, loan growth, costs, and M&A could drive a fair value closer to $20 over time.
Sentiment towards a sector has an under-appreciated influence in individual stock performance, and I think Fulton Financial (NASDAQ:FULT) is a case in point. The last year has been pretty mixed for this Pennsylvania-based bank, but its performance has been pretty close to that of Provident (NYSE:PFS) and Valley (NYSE:VLY), with the wider group of Northeast/Mid-Atlantic comparables largely bracketed by S&T Bancorp (NASDAQ:STBA) and F.N.B.(NYSE:FNB). All told, these banks have been benefiting from improving loan demand, improving spreads, and a healthy credit environment, even though they operate in a region with less population and household income growth potential than perennial favorites like Texas, Florida, and the Southeast.
