Versabank T.VBNK

Alternate Symbol(s): VBNK

Financial Services

VersaBank is a Canada-based chartered bank. The Bank provides commercial lending and banking services in Canada and the United States, as well as cybersecurity services and banking and financial technology development services through the operations of its wholly owned subsidiary DRT Cyber Inc. (DRTC). It operates through two segments: Digital Banking and DRTC (cybersecurity services). The Digital Banking segment obtains its deposits and provides its loans and leases electronically via deposit and lending solutions for financial intermediaries. Its loan portfolio includes point-of-sale loans and leases, commercial real estate mortgages, commercial real estate loans and public sector and other financing. The DRTC segment develops solutions to address the volume of cyber threats challenging financial institutions, multi-national corporations and government entities. It also offers receivable purchase program (RPP) funding solution for point-of-sale finance companies.

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Post by retiredcfon Oct 29, 2024 11:53am

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Ink Research

Morning Report: US expansion helps drive VersaBank outperformance

October 29, 2024

We last featured digital banking innovator VersaBank (VBNK) here on July 29th. Since the report, VersaBank closed the acquisition of Stearns Bank Holdingford N.A., allowing it to launch its Receivable Purchase Program (RPP) funding solution for point-of-sale finance companies in the US. The stock is up 26.7% on the TSX since our July report, ahead of the BMO S&P/TSX Equal Weight Banks Index ETF (ZEB), up 12.0%. Moreover, VersaBank had doubled over the past year versus a 41.4% gain for ZEB. There has been some recent insider profit-taking, but that is not a surprise given the stock's rally. Many of its larger peers have also seen profit-taking on the back of smaller 12-month gains including Royal Bank (RY).

In its fiscal Q3 (ended July 31st), VersaBank's loans increased 11% year-over-year, led by the RPP which rose 16%. Sequentially from Q2, loans and RPP lending rose 1% and 4% respectively. Net interest margin on loans fell 28 bps year-over-year and 11 bps sequentially to 2.41%. VersaBank attributes the drop in part to strong RPP growth as the RPP consists of lower-risk weighted, lower yielding but higher Return on Common Equity assets than its commercial real estate portfolio. Q3 net income was $0.36 per share, down 5% year-over-year and 20% sequentially. VersaBank attributes the decline in part to factors associated with preparations for the closing of the Stearns Bank Holdingford acquisition. The stock also trades on the Nasdaq under the symbol VBNK and on October 30th, CEO David Taylor will be presenting before US investors at the ThinkEquity Conference in New York City. Finally, should Donald Trump return to the presidency, we will be watching to see if the US adopts a new stablecoin regulatory that could potentially make it easier for VersaBank to pursue develop digital deposit receipts which we referenced in our July report.