On Wednesday, Piper Sandler, a prominent financial services firm, spotlighted Old National Bancorp (NASDAQ:ONB) and First Merchants (NASDAQ:FRME) Corporation (NASDAQ:FRME) in a note focusing on Midwest banks. The analyst underscored the potential of these institutions to exceed expectations in the future based on their current positioning and recent developments.
According to InvestingPro data, First Merchants has demonstrated strong momentum with a remarkable 41% gain over the past six months, suggesting growing investor confidence in its prospects.
Old National Bancorp has been lauded for its robust stand-alone narrative, which has been significantly enhanced by the recent Bremer transaction. This deal is expected to boost earnings per share (EPS) by over 20% and contribute additional low-cost, stable deposits. The firm's positive outlook is further supported by Old National's appealing valuation, which is anticipated to normalize over time. As a result, Piper Sandler has reiterated its Overweight (OW) rating for the bank's shares.
For First Merchants Corporation, there is anticipation of high single-digit loan growth in 2025. Despite a modest end-of-period loan increase of 1% last quarter, management remains optimistic due to a strong loan pipeline and the bank's continued strength in commercial and industrial lending. The bank's solid financial foundation is reflected in its attractive P/E ratio of 14.3x and consistent dividend history, having raised dividends for 13 consecutive years.
InvestingPro analysis suggests the stock is currently undervalued, with additional insights available in the comprehensive Pro Research Report.
First Merchants is also benefiting from infrastructure investments across Indiana, Michigan, and Ohio. While commercial real estate payoffs may present ongoing challenges, management is confident in achieving at least mid-single-digit loan growth for the next year, with Piper Sandler estimating a 5% year-over-year increase in 2025.
The analyst's note highlighted the strategic moves made by both banks, including Old National's recent acquisition and First Merchants' infrastructure investments, which could lead to significant loan growth. These factors contribute to the positive outlook for both ONB and FRME, positioning them as attractive prospects among mid-sized Midwest banking institutions.
First Merchants' financial health score is rated as "GOOD" by InvestingPro, which offers 6 additional valuable insights about the company's performance and prospects through its comprehensive analysis tools and Pro Research Reports.
In other recent news, First Merchants Corporation announced a cash dividend of $0.35 per share and reported strong third-quarter earnings. Total (EPA:TTEF) assets rose to $18.3 billion with earnings per share increasing to $0.84. The company is also set to sell five non-core Illinois branches, expected to provide a gain of $20 million to $25 million, aiding balance sheet restructuring. Piper Sandler, an investment firm, maintained an Overweight rating on First Merchants and adjusted the price target from $50.00 to $47.00.
The firm expressed confidence in the company's operational leverage forecast for 2025, including a return to mid-single-digit organic loan growth. The bank has plans for organic growth in 2025, especially in commercial and industrial and investment real estate segments. Additionally, First Merchants is open to acquisitions, particularly in Indiana, Iowa, and Michigan, as part of its growth strategy.
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