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Customers (CUBI) Announces Buyback Plan, 2021 Guidance Up

Customers Bancorp,Inc. CUBI has announced a new share-repurchase plan. Under the program, the board of directors of this West Reading, PA-based bank has authorized to buy back up to 10% of its outstanding common stock as of Jun 30, 2021, over a one-year period.

Indicating investor optimism of the news, shares of the company have gained 10.9% on Aug 27.

In November 2013, the board of directors had authorized a stock-repurchase plan, in which the company could acquire up to 5% of its outstanding shares at prices not exceeding a 20% premium over the then book value. On Dec 11, 2018, Customers' board of directors modified the terms of the 2013 stock-repurchase plan to adjust the repurchase terms and book value measurement date such that it was authorized to purchase shares of common stock at prices not to exceed the book value per share of the firm’s common stock measured as of Sep 30, 2018. Customers had repurchased all of the remaining authorized shares pursuant to this program in January 2019.

Additionally, the company has also updated its guidance for 2021. Depending on the timing of Paycheck Protection Program (PPP) loan forgiveness, management has hiked the 2021 core earnings per share in the range of $7-$8, up from the prior guidance of $6 per share. Consequently, the book value is expected to be up to $37 per share, before accounting any effect of share repurchases.Apart from this, the company also anticipates to inaugurate its previously-announced Real Time Payments systems network before the end of third quarter this year. Moreover, the company’s fintech competencies mustered shareholder value creation worth $72.5 million through the BankMobile divestiture, and special one-time dividend and total anticipated revenues from PPP alone, worth nearly $400 million.

Customers’ improving times interest earned and total debt-total capital ratios, along with its earning strength, indicate that its capital deployments are sustainable and will continue enhancing shareholder value. However, low interest rates are expected to keep hurting its financials in the near term.

Customers’ return on equity of 25.04%, compared with the industry average of 11.48%, indicates the company’s commendable position over its peers.

Shares of Customers have rallied 57% over the past six months, outperforming the industry’s growth of 3.2%.

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Currently, the company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Banks That Took Similar Actions

Over the past few months, several banks have announced new share-repurchase programs. Some of these are Cathay General Bancorp CATY, Amerant Bancorp Inc. AMTB and City Holding Company CHCO.

Cathay General’s board of directors has authorized the repurchase of shares worth up to $75 million this year. Amerant Bancorp has announced a new share-repurchase program, authorizing $40 million worth of its Class B common stock. Further, City Holding’s board of directors has authorized the buyback of up to 1 million shares, with no expiration date.

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