VersaBank (VBNK) PT Lowered to $20 at Raymond James

Raymond James analyst David Feaster lowered the price target on VersaBank (NASDAQ: VBNK) to $20.00 (from $23.00) while maintaining a Outperform rating.

The analyst comments "We reiterate our Outperform rating and $23 price target (10.7x 2027E EPS) on shares of VBNK following F3Q26 results that fell short of our EPS/PPNR forecasts. While the quarter was somewhat noisy, management remained bullish on the core business, highlighting strong demand for its AIenabled Real-Time SRP product (link) and a FY27 outlook that calls for at least $3 billion USD of additional U.S. SRP fundings, with additional upside possible from faster growth in Canada as the rollout expands. Specifically for the U.S., it believes it can achieve ~$1.5 billion of growth from current partners, while highlighting its total target represents $1.75 in incremental EPS ($3 billion at a 2.50% spread). A potential governor to this growth is capital, as the leverage ratio declined to 7.6% in F3Q, and management continues to pursue a lower risk-weighting on homegrown SRP assets, with a mid-2027 timing target tied to regulatory approval and structural alternatives. Moreover, it expects FY27 noninterest expense will remain relatively flat from the rebased F3Q level of $19.8 million, which, in conjunction with its growth expectation, would translate to material operating leverage. Looking ahead, we are increasing our 2027E EPS by a nickel, driven by faster earning asset growth, albeit still below management’s more optimistic outlook, partially offset by a lower NIM. In addition to this growth, management remains optimistic it will receive regulatory approval to advance its tokenized deposit initiative, which would be a complete game changer. While execution risk remains, we believe the story continues to move in the right direction. The business remains positioned for attractive growth, supported by strong demand for its SRP products, favorable regulatory developments surrounding digital assets, and improving operating leverage. All in, we continue to view the risk/reward favorably, given the company’s U.S. growth trajectory, optionality from DRTC, digital asset initiatives (which remain unmodeled), and what we expect will be continued validation of its de minimis credit risk business model through the cycle."

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