United Bankshares: A Turnaround in Credit Quality

United Bankshares has reported strong credit quality, with the past few months being better for the West Virginian lender. The bank has returned around 11% since my previous recommendation in February. Despite a rocky start to the year, the bank's credit quality remains robust, making it a good investment option for those looking for a stable and reliable financial institution.

United Bankshares (NASDAQ: UBSI), a West Virginian lender, has reported strong credit quality and a robust performance in recent months. The bank has returned around 11% since my previous recommendation in February, despite a rocky start to the year. This performance aligns with the broader regional bank space, as United's focus on commercial real estate (CRE) loans has historically been a strength [1].

United Bankshares has maintained a meaningfully lower long-term loss rate compared to the sector. The bank's delinquencies and loan losses remain relatively benign, while earnings have seen a boost from recent mergers and acquisitions (M&A). The bank's net interest income rose 22% to $274.5 million, driven by a 9% year-over-year growth in interest-earning assets and accretion from fair value marks [1].

In terms of competitive advantages, United Bankshares' management highlights its wider-than-average net interest margin and historically sound credit quality. Despite concerns about its high concentration of CRE loans, United's long-term average net charge-off rate is around half the peer group average, including a period of outperformance during the 2007-2009 financial crisis [1].

Credit quality trends remained solid at the halfway point of the year. United's net charge-off rate was only 0.14% of total loans over the first two quarters, while delinquencies did not increase. The bank's healthy capital levels, with Common Equity Tier 1 (13.4%) and tangible equity (10.8%) ratios looking strong, also provide a last line of defense [1].

United Bankshares has received a consensus rating of Hold from analysts, with an average rating score of 2.00. The company's earnings are expected to grow by 9.61% in the coming year, with a P/E ratio of 13.04, which is less expensive than the market average P/E ratio of about 28.83 [2].

The bank's dividend yield of 3.91% is in the top 25% of dividend-paying stocks, and it has been increasing its dividend for 26 years. The dividend payout ratio is at a healthy, sustainable level below 75%, with a short interest ratio of 4.4, indicating a healthy percentage of shares shorted [2].

In conclusion, United Bankshares has reported strong credit quality and performance in recent months. Despite concerns about its high concentration of CRE loans, the bank's historically sound credit quality and strong capital levels make it a good investment option for those looking for a stable and reliable financial institution.

References:
[1] https://seekingalpha.com/article/4813919-united-bankshares-stock-credit-quality-still-looking-robust
[2] https://www.marketbeat.com/stocks/NASDAQ/UBSI/