Bruce Hague, who serves as President of National Commercial Banking at PrivateBancorp Inc (NASDAQ:PVTB), bought 4,000 shares of the company’s stock on October 11th at an average price of $15.75, according to a filing with the SEC. Hague now owns about 150,000 shares directly. He had also bought shares in the summer of 2011, at prices generally between $8 and $9 per share; note that Hague made gains on those investments as PrivateBancorp has nearly doubled in price over the last year. Research Hague’s transactions. Insider purchases tend to be followed by increases in the stock price (read our analysis of studies on insider trading). We generally think that this is because insiders would prefer to invest their money in a different company than the one they work for (otherwise poor performance by the company would hit their income and their wealth) and so they must be quite confident in order to buy shares.
PrivateBancorp Inc is a retail and commercial bank primarily operating in the Midwest which also offers private banking services to high net worth clients. It recently announced plans to buy back the company’s stock that was acquired by the federal government in exchange for TARP funds. In the third quarter of the year, net income roughly doubled compared to the third quarter of 2011 (and was up 39% on a q/q basis). The first three quarters of 2012 have yielded a 93% in earnings, and EPS have risen from 32 cents to 61 cents. Some of these gains came from lower provisions for loan losses, though to some degree this may be appropriate as the bank has been reporting better loan performance.
With the impressive gains in its stock price over the last year, PrivateBancorp Inc actually trades at a premium to the book value of its equity at a P/B of 1.1. It is expensive on a trailing earnings basis, with a P/E of 24 when looking at the last four quarters, but annualizing its most recent quarterly report would yield a P/E of 16. Wall Street analysts expect continued improvement, and so it trades at 14 times forward earnings estimates. Columbus Circle Investors, managed by Donald Chiboucis, increased its stake by 20% during the second quarter and owned 1.2 million shares at the end of June (see more stocks owned by Columbus Circle Investors).
PrivateBancorp’s peers include $1-2 billion market cap Midwestern banks Firstmerit Corp (NASDAQ:FMER), Wintrust Financial Corp (NASDAQ:WTFC), Old National Bancorp (NYSE:ONB), and Associated Banc Corp (NASDAQ:ASBC). Of these four comparable companies only Old National, at a P/B ratio of 1.2, trades at a premium to PrivateBancorp in terms of its book value. Old National trades at 12 times forward earnings estimates, and with a 2.7% dividend yield (PrivateBancorp’s dividend is very small) and strong earnings growth in the second quarter versus a year earlier it seems priced about even. Firstmerit trades right at the book value of its equity, and also carries a forward P/E of 11. Even though its growth rates have been modest, it appears to be a better value stock than PrivateBancorp and also pays a 4.5% dividend yield.
Wintrust and Associated, meanwhile, trade at small discounts to book value. However, on a forward earnings basis they are about as expensive as PrivateBancorp: Wintrust and Associated have forward P/E multiples of 16 and 13, respectively. Both of these banks did see strong growth in their most recent quarter, as revenue increased by at least 15% and earnings increased by at least 25% (and doubled at Wintrust) versus the same period a year earlier. We could look at them on an absolute basis- good growth and forward multiples in the teens- but they do seem about even with PrivateBancorp as investments.
We’re certainly taking note of the insider purchase at PrivateBancorp. However, even if the company improves in line with Street expectations it does not seem like a good value compared to Firstmerit and is not particularly more attractive than other similarly sized Midwestern banks.