Banc of California's (BANC) Valuation in Light of a Rebounding Regional Banking Sector

The regional banking sector has entered a phase of renewed optimism in 2025, driven by a combination of favorable monetary policy, improved credit conditions, and disciplined cost management. Against this backdrop, Banc of California (BANC) emerges as a compelling relative value opportunity, with its valuation metrics and earnings trajectory suggesting underappreciated potential.

Valuation Metrics: A Tale of Two Ratios

BANC's trailing price-to-earnings (P/E) ratio of 26.04 as of October 2025 exceeds the regional banking sector average of 19x, according to StockAnalysis statistics, a gap that might initially suggest overvaluation. However, this metric obscures a more nuanced picture. The company's forward P/E ratio of 11.69 aligns closely with sector norms, indicating that analysts and investors anticipate a rapid normalization of earnings. More compelling is BANC's price-to-book (P/B) ratio of 0.94, which trades at a discount to the sector average, per StockAnalysis statistics. This discrepancy suggests that BANC's equity is undervalued relative to its tangible assets, a rare anomaly in a sector where intangible-driven valuations often dominate.

The absence of a reliable EV/EBITDA ratio for BANC complicates a full valuation analysis, per ValueInvesting, but sector-wide data provides context. The regional banking sector's average EV/EBITDA ratio of 9.8 in 2025, according to FullRatio industry multiples, implies that BANC, if it were to report a similar multiple, would likely trade at a discount given its lower P/B. This divergence hints at a potential mispricing, particularly for a bank with BANC's asset quality and capital position.

Earnings Momentum: A Catalyst for Re-rating

BANC's earnings trajectory in 2024-2025 underscores its operational resilience. The company reported a net income of $47 million in Q4 2024, according to a Banc of California press release, a stark turnaround from a $1.2 million loss in Q3 2024. For Q2 2025, adjusted earnings per share (EPS) surged to $0.31, surpassing the $0.28 consensus estimate, as noted on the MarketBeat earnings page. This momentum is not an isolated event: BANC's full-year 2024 adjusted net income of $135.4 million, or $0.80 per share, reflects a 55% increase from 2023, per the Banc of California press release.

The broader sector has also seen a rebound, with two-thirds of U.S. regional banks reporting year-over-year earnings growth in Q4 2024, according to an S&P Global article. BANC's 106.2% YoY EPS increase outperformed even these strong sector trends, positioning it as a standout performer. This momentum is underpinned by disciplined expense management-noninterest operating expenses fell 36% in Q4 2024, per the Banc of California press release-and strategic balance sheet repositioning, including the sale of $507 million in commercial real estate loans to optimize credit quality, as reported on the MarketBeat earnings page.

Historical data on earnings beats provides further context. A backtest of BANC's performance following earnings surprises from 2022 to 2025 reveals mixed signals: while the stock has historically outperformed its benchmark in 60% of cases after beating estimates, the average return over 30 days has been modest (e.g., +1.8% at day 23), and the effect tends to fade within two weeks. This suggests that while positive earnings surprises have occasionally driven short-term momentum, they have not consistently translated into durable alpha for investors, according to backtest results.

The Monetary Policy: Tailwinds and Tail Risks
The Federal Reserve's 2025 rate-cutting cycle has introduced both challenges and opportunities for regional banks. While lower rates compress net interest margins (NIMs), BANC has mitigated this risk through proactive cost control and a focus on fee-based income. Its NIM expanded to 3.04% in Q4 2024, per the Banc of California press release, outpacing the sector average, and the bank's CET1 capital ratio of 10.55% as of year-end 2024 provides a buffer against margin compression, according to the Banc of California press release.

The Fed's revised monetary policy framework, which emphasizes flexibility in achieving its dual mandate of price stability and maximum employment, is discussed in the ABA Banking Journal review, and further supports regional banks. By avoiding rigid inflation targeting, the Fed has created a more accommodative environment for credit growth, a critical driver of regional bank profitability. BANC's focus on real estate lending and its recent loan growth of 2% in Q2 2025, as shown on the MarketBeat earnings page, position it to benefit from this dynamic.

Conclusion: A Relative Value Play with Upside

BANC's valuation metrics and earnings performance paint a picture of a bank that is both undervalued and underappreciated. Its P/B discount and forward P/E alignment with sector averages suggest a compelling entry point, while its earnings momentum and capital discipline provide a margin of safety. In a sector where the average EV/EBITDA ratio is 9.8, per FullRatio industry multiples, BANC's lack of a disclosed EBITDA metric may reflect operational complexity but also creates an opportunity for re-rating if the bank can demonstrate consistent cash flow generation.

As the regional banking sector continues to rebound, BANC's strategic agility and cost discipline make it a standout candidate for investors seeking relative value. The key risks-namely, the Fed's ability to maintain its accommodative stance and BANC's execution on its balance sheet optimization-remain manageable, given the bank's strong capital position and proactive management. For those willing to look beyond the noise of missing EBITDA data, BANC offers a rare combination of valuation appeal and earnings potential.