J.P.摩根-美股銀行業(yè)-美國中小盤銀行賺錢策略更新：卓越的客戶體驗(yàn)和強(qiáng)勁的增長歷來能帶來可觀的表現(xiàn)

NorthAmericaEquityResearch

15June2022

U.S.Mid-andSmall-CapBanks

MoneyMakingPlaybookUpdate

SuperiorClientExperienceandStrongGrowthHas

HistoricallyResultedinaSubstantialOutperformance

Lastyearweputforththeviewinour“MoneyMakingPlaybook”thattherearethreekeymetricsthatdrivebankstockoutperformanceovertime:(1)revenuegrowth,(2)EPSgrowth,and(3)TBVgrowth.Inthisreport,weaddonemoremetrictofurtherisolatethelong-termwinners:netpromoterscores(NPS)—akeymeasureofcustomersatisfaction.Infact,weanalyzedstockperformancedataandJ.D.Power’sNPSscoresfrom2017-2022andfoundthatwhilebankswithahigherNPShistoricallyoutperformedbankswithlowerNPSonanoverallbasis(andbyawidemargin),whengrowthofourthreekeymetrics(asindicatedabove)wasalsoaddedintotheequation,thebankswithasuperiorNPSandstronggrowthsubstantiallyoutperformedpeers.Infact,overthepast5yearsbankswithhighclientexperiencescoresandstronggrowthoutperformedby~50%(increasing38%whilebankswithlowclientexperiencescoresandsluggishgrowthdelivereda-10%returnoverthesametimeframe).Whileconsistentlyhighclientexperiencenaturallyleadstostrongeroveralltopandbottomlinegrowth,forthebankswhichalsohaveanentrepreneurialculturewhichamplifiesthebenefitsofasuperiorclientexperience(whichresultsinmarketsharegainsandevenstrongergrowthovertime),thesearethebankswherewewouldconcentrateportfolios.WhileweonlyhaveNPSscoresforbankswithover50branches(whichexcludesbankssuchasSIVB,SBNY,andSI),fromthecohortfromwhichwedohavethedata(includedinthisreport),banksthatstandoutincludeFRC,CFR,PNFP,HBAN,andLOB.Intermsoftheupdated2022J.D.Powerdata,bankswhichsawthestrongestimprovement(over2021)inNPSincludedHBT,FMBI,andWTFC,whilebanksthatsawthesharpestdecreasesinNPSincludedCOLB,PBCT,andWBS.

U.S.MidandSmallCapBanksStevenAlexopoulos,CFAAC

(1-212)622-6041

steven.alexopoulos@BloombergJPMAALEXOPOULOS<GO>AlexLau

(1-212)622-3428

alex.lau@

JanetLee

(1-212)622-4803

janet.s.lee@

AnthonyElian,CFA

(1-212)622-5067

anthony.elian@

J.P.MorganSecuritiesLLC

2022NPSLeadersIncludeManyRegularsWhileLaggardsIncludeSomeNew

Faces.FirstRepublicretainedthe#1spotwhileWintrustandFrostmoveduptothe

#2and#3spots,respectively.Ontheothersideofthespectrum,Sterlinghadthe

lowestNPSwhileComericaandWellsFargoroundedoutthebottom3.

ConsistentNPSLeadersOutperformedConsistentNPSLaggardsby46

PercentagePointsOverthePast5Years.AnalyzingNPSscoresfrom2017-2022,

“consistent”banksthatranked3+timesfortop10NPSwithintheseyearsgenerated

46%highertotalreturnoverthistimevs.banksranked3+timesforbottom10NPS.

CullenFrosttheExamplethatRegionalBanksCanLeadinDigitalAge.Based

on2022data,banksinourcoveragerankedbelowneobankswhilealsoranking

belowthebig5banksinthedigitalchannelscategory.Withthatsaid,Frostis

leadingthepackwithoverallclientsatisfactionmetricsthatarewellaboveneobanks

aswellasbeingthehighestrankedbankintheUSinthedigitalchannelscategory.

CustomerSatisfactionSubcategoryScoresinAppendix.Beginningonpage33,

weincludeNPSandoverallsatisfactionandsubcategoryscoresbybank.

Seepage40foranalystcertificationandimportantdisclosures.

J.P.Morgandoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.

2

StevenAlexopoulos,CFA

(1-212)622-6041

steven.alexopoulos@

NorthAmericaEquityResearch

15June2022

TableofContents

PortfolioManager’sSummary:CustomerSatisfactionand

ShareholderReturns 4

DeepDiveonCustomerSatisfactionandShareholder

Returns 8

2022NetPromoterScoreUpdate 8

NPSandTotalReturnTrends 11

ThePowerofCompounding 14

SubstantiallyHigherReturnsforBankswithHighClient

ExperienceandGrowth 20

2022J.D.PowerOverallSatisfaction(OSAT)ScoresUpdate

23

2022NeobankCustomerSatisfaction 27

TheRoadmapforRegionalBanks 28

TheRoadAhead 32

Appendix:NPSandOSATData 33

3

StevenAlexopoulos,CFA

(1-212)622-6041

steven.alexopoulos@

NorthAmericaEquityResearch

15June2022

Table1:J.P.MorganUSMid-andSmall-CapBanksCoverageUniverse

J.P.MorganU.S.Mid-andSmall-CapBankUniverse

FedFundsAssumptions

Price/

Price/

Price/

213%

300%

MRQ

Dollar

Current

RegionalBanksJPMSeniorLast

Dec'22Price

TotalAssets

MarketCap

2021AEPS

2022EEPS

2023EEPS

CoreEPS

CoreEPS

Core

EPS

TBV

Per

VolumeDividend

2022e30DayMAYield

ShortInterest

TickerCompany

RatingAnalystPrice

Target

($Bil.)

($Bil.)

(x)

(x)

(x)

2021A

2022E

2023E

Share

P/TBV($MM)(%)

(%ofo/s)

AMALAmalgamated

Neutral

Lee$20.11

$21.00

$7.7

$0.6

11.7

8.4

7.0

$1.72

$2.40

$2.88

$17.56

111%$2.31.6%

0.6%

BKUBankUnitedUnderweightAlexopoulos$36.09

$43.00

$36.3

$3.0

8.9

9.5

8.8

$4.04

$3.81

$4.11

$34.56

103%$31.92.8%

5.0%

CMAComericaOverweightAlexopoulos$74.84

$108.00

$89.2

$9.8

9.0

10.0

7.1

$8.34

$7.51

$10.53

$52.47

153%$103.13.6%

1.7%

CFRCullen/FrostOverweightAlexopoulos$115.73

$155.00

$51.3

$7.4

17.0

14.6

11.0

$6.79

$7.95

$10.54

$56.86

228%$41.92.6%

2.4%

EBCEasternBanksharesNeutralLee$18.69

$23.50

$22.8

$3.4

19.2

15.4

12.3

$0.97

$1.21

$1.53

$14.80

142%$13.42.1%

1.6%

FBKFBFinancialUnderweightLau$39.32

$41.00

$12.7

$1.9

10.4

12.3

9.7

$3.78

$3.21

$4.04

$24.67

153%$5.11.3%

1.7%

FHBFirstHawaiianUnderweightAlexopoulos$23.17

$26.00

$25.0

$3.0

10.7

12.7

10.6

$2.16

$1.82

$2.19

$13.03

220%$14.64.5%

4.0%

FHNFirstHorizonNotRatedAlexopoulos$21.66

N/A

$88.7

$11.6

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A$100.52.8%

5.5%

HBTHBTFinancial

NeutralElian$17.11

$20.00

$4.3

$0.5

8.4

9.7

8.6

$2.04

$1.76

$1.99

$13.13

132%$0.33.7%

0.3%

HBANHuntingtonBancsharesOverweightAlexopoulos$12.24

$17.50

$176.9

$17.6

7.8

8.7

7.7

$1.57

$1.40

$1.58

$8.04

151%$152.15.1%

2.4%

KEY

KeyCorp

NeutralAlexopoulos$17.54

$25.00

$181.2

$16.4

6.7

8.1

7.0

$2.62

$2.18

$2.52

$13.72

139%$172.04.4%

2.3%

MTBM&TBankNeutralAlexopoulos$164.90

$200.00

$149.9

$29.6

11.6

10.6

9.1

$14.18

$15.59

$18.18

$89.79

147%$188.22.9%

2.2%

NYCBNYCommunityBancorpNeutralAlexopoulos$9.10

$11.00

$61.0

$4.3

7.3

6.8

6.1

$1.24

$1.33

$1.48

$9.93

89%$78.47.5%

10.8%

PNFPPinnacleFinancialOverweightAlexopoulos$72.83

$123.00

$39.4

$5.6

10.8

10.2

8.4

$6.74

$7.14

$8.70

$42.55

157%$31.01.2%

2.3%

SNVSynovusOverweightAlexopoulos$36.66

$60.00

$56.4

$5.3

7.4

8.0

6.5

$4.96

$4.56

$5.67

$29.46

128%$33.83.7%

2.5%

TCBITexasCapitalBancsharesUnderweightElian$49.79

$50.00

$31.1

$2.5

10.6

17.6

12.6

$4.69

$2.83

$3.95

$57.14

88%$22.80.0%

4.0%

UMPQUmpquaHoldingsNotRatedAlexopoulos$16.58

N/A

$30.6

$3.6

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A$28.35.1%

3.5%

VLYValleyNationalBancorpNeutralAlexopoulos$10.70

$14.00

$43.6

$5.4

9.3

8.7

7.6

$1.16

$1.23

$1.41

$7.94

131%$30.54.1%

2.5%

WBS

Webster

NeutralAlexopoulos$45.06

$61.00

$65.1

$8.0

9.7

8.4

7.1

$4.66

$5.39

$6.38

$30.39

147%$52.83.6%

2.6%

ZIONZionsBancorporationNeutralAlexopoulos$51.82

$75.00

$91.1

$7.8

8.0

8.7

7.2

$6.50

$5.97

$7.20

$39.62

148%$70.82.9%

1.2%

RegionalBanksMedian

9.5

9.6

8.1

144%

3.2%

2.4%

Price/

Price/

Price/

MRQ

Dollar

Current

NicheBanks

JPM

SeniorLast

Dec'22

Total

Market

2021A

2022E

2023E

Core

Core

Core

TBV

Volume

Dividend

Short

Price

Assets

Cap

EPS

EPS

EPS

EPS

EPS

EPS

Per

2022e

30DayMA

Yield

Interest

Ticker

Company

Rating

Analyst

Price

Target

($Bil.)

($Bil.)

(x)

(x)

(x)

2021A

2022E

2023E

Share

P/TBV

($MM)

(%)

(%ofo/s)

FRC

FirstRepublicBank

Overweight

Alexopoulos

$136.96

$215.00

$187.1

$24.6

18.0

16.0

13.4

$7.63

$8.58

$10.23

$67.10

182%

$153.2

0.8%

1.5%

LOB

LiveOakBancshares

Overweight

Alexopoulos

$34.40

$58.00

$8.6

$1.5

11.1

13.4

12.0

$3.10

$2.57

$2.86

$16.31

155%

$12.9

0.3%

6.8%

MCB

MetropolitanCommercial

Overweight

Lau

$69.16

$155.00

$6.6

$0.8

10.8

8.3

6.3

$6.40

$8.37

$11.02

$50.09

122%

$7.6

0.0%

4.5%

SBNY

Signature

Overweight

Alexopoulos

$178.06

$460.00

$121.8

$11.2

11.8

8.3

6.1

$15.03

$21.51

$28.98

$117.57

134%

$227.0

1.3%

4.1%

SI

SilvergateCapitalCorp

Overweight

Alexopoulos

$65.01

$200.00

$15.8

$2.1

23.7

17.2

8.9

$2.75

$3.77

$7.29

$40.40

134%

$89.4

0.0%

11.2%

SIVB

SVBFinancial

Overweight

Alexopoulos

$406.39

$875.00

$220.4

$23.9

12.3

10.8

7.0

$32.94

$37.79

$58.03

$205.64

169%

$255.5

0.0%

2.8%

NicheBanksMedian

12.1

12.1

8.0

144%

0.2%

4.3%

RLGRussell1000GrowthIndex

$2,149

N/AN/A$22.6T

21.719.0

N/AN/AN/A

N/AN/AN/AN/AN/A

CoverageMedian

2.8%2.5%

9.88.1

144%

10.7

Source:Companyreports,BloombergFinanceL.P.,andJ.P.Morganestimates.Note:Pricesandvaluationasof6/14/22close.

4

StevenAlexopoulos,CFA

(1-212)622-6041

steven.alexopoulos@

NorthAmericaEquityResearch

15June2022

PortfolioManager’sSummary:CustomerSatisfactionandShareholderReturns

SuperiorClientExperienceandStrongGrowthHasHistoricallyResultedinaSubstantialOutperformance

InourMoneyMakingPlaybookreportpublishedlastyear(linkhere),weputforthananalysisofmorethantwodecadesworthofdatawhichdemonstratedthattherewerethreekeymetricsthatmatteredmostforbankstockoutperformance:(1)revenuegrowth(pershare),(2)EPSgrowth,and(3)TBVgrowth.Inourfindings,thebankstocksthatdeliveredstrongtoplinegrowth,andthenallowedthistoplinegrowthtopropelbottomlineandTBVgrowth,deliveredoutsizedreturnstoshareholdersovertime.Moreover,manyofthenarrativesthathistoricallydominatedtheconversation,suchascapitalreturnstories,positiveoperatingleveragestories,andturnaroundstories(amongmanyothers)wereproventobearlittlefruitwhenitcametothetaskofgeneratingalphawithinportfolios.Withstronggrowthofrevenue,EPS,andTBVthekeystothecastle,however,intermsofgeneratingoutsizedreturnsforshareholders,wealsoputforthaviewtoinvestorsthatgiventhatanybankcanoutperformonthesemetricsovertheshort-runsimplybypayingthehighestratesondepositsandofferingtheloosesttermsonloans,thatinorderforustopositionwithinthestronggrowers,itwasourstrongpreferencetopositionamongthosebankstakingmarketshareasaresultofofferingasuperiorclientexperience.

Whilemostinvestorsseemedtoagreewithourthesis,manyaskedifwehadthehistoricaldatatoproveoutifbankswithsuperiorclientsatisfactionscoresalsooutperformedovertime.Tothisend,includedinthisreportistheanalysisofstockperformanceandclientsatisfactiondatafrom2017through2022.WhilethedatafromJ.D.Powerspansbackto2010,thechallengewasthatoverthepastseveralyearsthemethodologychangedseveraltimestoarriveattheoverallsatisfactionscore(OSAT)makingtheanalysisabitofanapples/orangescomparison.Withthatsaid,however,from2017onJ.D.Powercollectednetpromoterscore(NPS)resultsandfromthisdataset,wewereabletoconductadeepanalysis.Whileweincludeinthisreportmuchoftheanalysisthatwascompleted,onanoverallbasiswehadseveralnewtakeawaysincluding(1)onanoverallbasis,bankswithahigherNPStendedtogrowfaster(onthethreekeymetrics)thanlowerNPSbanks,(2)thathigherNPSbankstendedtooutperform(andbyafairlywidemargin)lowNPSbanks,and(3)thatwhencombiningthese,orwhencomparingbankswithhighNPS/growthtobankswithlowNPS/growththatthebankswithhighNPSandstronggrowthoutperformedthelowNPSandsluggishgrowthbanksbyasubstantialmargin.Infact,from2017through2022,banksinthetopquartileofNPSand,withinthiscohort,topquartileofgrowth,delivereda38%totalreturnascomparedtoa-10%returndeliveredoverthesametimeframeforbanksinthebottomquartileofNPSand,withinthiscohort,thebottomquartileofgrowth(resultinginanoverall~50%outperformanceover5yearsorby~10%peryear).Infact,fromthechartbelow,it’sveryclearthatonahistoricalbasishighNPS/highgrowthbankshaveoutperformedlowNPS/lowgrowthbanksbyaverywidemargin.

5

StevenAlexopoulos,CFA

(1-212)622-6041

steven.alexopoulos@

NorthAmericaEquityResearch

15June2022

Figure1:5-YearTotalReturnComparisons

Source:J.D.Power,companyreports,andBloombergFinanceL.P.Dataisfrom6/13/17-6/13/22.

Basedonalloftheworkwehavedoneonclientexperienceandstockperformance,thenuanceofthisdistinctionisactuallyquiteimportant.Whileitissomewhatintuitivethatbankswithsuperiorclientsatisfactionscoreswillbeinapositiontotakemarketsharefrombankswithpoorclientsatisfactionscores,therealityisthattherearesomebankswhicharereallygoodatclientservicebutarenotthatmotivatedtotakeadvantageoftheircompetitivepositioninordertodeliverstrongoverallgrowthmetrics.Asanexample,manyreadersarelikelyfamiliarwiththesmallhardwarestoreinmostcommunitieswhichdeliverstopnotchcustomerservice,buthasbeeninthesamelocationfor50yearsandiscontentwithsimplyservingthatonemarket.Ontheotherhand,therearethentheHomeDepots(orLowe’sforthatmatter)whichhavetakenamodelofsuperiorclientserviceinasinglelocationbutthenleveredthisadvantageintomarketsallovertheUnitedStates(aswellasCanadaandMexico).SamecouldbesaidforthatcornercoffeeshopwhichhasbeenthereforgenerationsascomparedtowhatStarbuckshasaccomplishedoverthepast50+years.WhatseparatestheHomeDepotsandStarbucksfromtheother“momandpop”typebusinessesisanentrepreneurialculturethatstrivesforgrowth.Inbanking,wearelookingforthosebankswhichhaveessentiallypreservedthe“momandpop”typeservicemodelbutarealsohighlymotivatedtotranslatethisadvantageintowellabovepeertopandbottomlinegrowth.Moreoftenthannotthebanksthatareabletorapidlyscalea“momandpop”typeculturearerunbytheirfounders.

Whiletheformularequiredtooutperformoverthelong-termisveryclearfromthedataweareprovidinginthisreport,therealityisthatonlyahandfulofbanksareableto(1)deliversuperiorserviceandthen(2)translatethisadvantageintowellabovepeergrowthofrevenue,EPS,andTBVovertime.Firstandforemost,whilemostCEOsacknowledgethatclientserviceisoneoftheirtoppriorities,therealityisthatmanybanksareunwillingtoeliminatemanyofthefrictionpointswhichcontinuetoplaguetheindustry.Tothisend,weremainadamantinourviewthatallbanksshouldeliminateoverdraftfees.Similartohowlatefeesonmoviesfadedintothehistorybooks,it’sonlyamatteroftimewebelievebeforethesefeesarefullyeliminatedwiththeonlyrealchoiceforabankmanagementbeingwhethertheywillleadorlagthisinevitability.Beyondamyriadoffees(includinghiddenfees)weighingonclientexperience,manyregionalbanksarestilloperatingwithcoreoperatingsystemsthataredecadesold.Whilethereareworkarounds,whichareexpensive,theclientsatisfactiondataisclearthatneobanksaretodayaheadofregionalbanksbasedonoverallsatisfactionscores.

6

StevenAlexopoulos,CFA

(1-212)622-6041

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NorthAmericaEquityResearch

15June2022

Whilewepreviouslyputforthathesisthatmanyregionalbanksarepositionedasendgamewinnersinthedigitalageofbanking,basedonthe2022J.D.Powerdata,ourthesisremainspreciselythat:athesis.Infact,whileclientsatisfactionscores(asmeasuredbyNPS)fortheregionalbanksincreasedby3pointsovertheprioryear,whencomparedtoonline-onlybanks,neobanksrankedhigheronanoverallclientsatisfactionscorebasisthantraditionalbankswiththesenewerentrantswinningpraisebycustomersbybeingeasytodobusiness,bynotcharginghiddenfees,byprovidingpersonalizationandbyprovidinginnovativetechnology.Whiletraditionalbanksoutperformneobanksacrossmostcategories,theidentifiedfrictionpointsaresignificantenoughtoresultinregionalbankslaggingneobanksonanoverallbasis.Withthatsaid,withregionalbanksscoringwellfromacustomerservicestandpoint,wherehumantohumaninteractionisstillhighlyvaluedamongcustomers,traditionalbanksalsoscorewellintermsofsupportingtheircustomersthroughtougheconomictimes.

Moreover,CullenFrostissettingtheexampleofhowatraditionalbankcandriveasuperiorclientexperiencevs.neobanksaswellasposthighersatisfactionscoresvs.themegabanksintheonecategorywheremostregionalbanksfallshort:digitalchannels.Tothisend,whilewebelieveCullenFrost,andFirstRepublicforthatmatter,areblazingthepathforregionalbankstofollow,we’restartingtothinkthatthebankscurrentlyexcellingonclientexperienceareinthebestpositionfromacultureviewpointtocontinuedoingsowhiletheclientexperiencelaggards,byremainingfocusedonitemsthatdon’tcreatemuchvalueforshareholders(includingcapitalreturn,M&Atransactions,theefficiencyratio,andcheckingthepositiveoperatingleveragebox,tonameafew),willlikelycontinuetolagintheyearsahead.

Wewouldalsostressthattheanalysis(inthisreport)alsorevealsthatconsistencyofdeliveringstrongclientexperiencetocustomers(yearafteryear)isparamount.Tothisend,banksthatfocusonclientexperienceoneyearandthensomethingelsethenextyear(suchasacostcuttinginitiativethatdamagestheclientexperience)havehistoricallylaggedbankswhichdeliverasuperiorclientexperienceonaconsistentbasis.Infact,inthedigitalageit’sbecomeasimpleswipeofanapptofindnetpromotersornetdetractorsofabrand.Tothisend,thebanksthatconsistentlydeliveranelevatedclientexperienceovertimeeventuallymoveontoreapthebenefitsofnetworkeffects.PerhapsthestrongestexampleofthisisFirstRepublic,whichhasnotonlyseenitsnetpromoterscoreriseasthecompanyhasgrownlarger,butat$180B+ofassetsmaintainsthehighestNPSintheentirebankindustry(andcontinuestogrowinthe15-20%range).Tothisend,FirstRepublicfounderJimHerbertelegantlymakesthepointthatwhilemanyinvestorsmakethecasethatthelawoflargenumberswouldargueforslowinggrowthasacompanygetslargerovertime,forthecompanieswithasuperiorclientexperience,gettinglargerworkstoaccelerategrowthwhereasforthecompanieswithasub-parclientexperience,thatgrowthdoesindeedforgeitsownanchor.

Asaresult,fromourcoverageuniverse,webelievethebanksbestpositionedtooutperformoverthelong-term,tiedtoconsistentlydeliveringsuperiorservicelevelstoclients,includeFirstRepublic,CullenFrost,Pinnacle,Huntington,andLiveOak.Wewouldalsopointoutthatwhilewedon’thaveclientsatisfactionmetricsforbankswithlessthan50branches,thatdoesnotmeanthatbanksforwhichwedonothaveanNPSscorearenotdeliveringasuperiorclientexperiencetotheirclients.Infact,whenwelookatSiliconValleyBank,Signature,Silvergate,andMetropolitanCommercialBank,ameetingwithcustomersfromthesebanksrevealsthatthesebankshave“fans”ratherthancustomers.Moreover,eachofthesebanksare

7

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15June2022

positionedwebelievetoleadthepackinthethreemetricsthatmattermostforoutperformanceoverthelong-term(revenue,EPS,andTBVgrowth).

Asaresult,basedonalloftheworkwehavedonestudyingstockperformanceandclientexperiencedata,fromalong-termoutperformanceperspectivewewouldconcentrateportfoliosamong(inorder):FRC,SIVB,SBNY,CFR,PNFP,SNV,SI,MCB,HBANandLOB.WhilethenetpromoterscorefromSynovusdippedin2022tobelowaverage(at41vs.peersat44),withamanagementteamthatislaserfocusedonimprovingcustomersatisfactionlevels,thisisacompanythatwebelievewillmoveintothetopquartileoverthenextfewyears(withbank’sreportingimprovingcustomersatisfactionmetricsalsohistoricallyoutperformingovertime).Whatshouldbegleanedfromthisgroupofbanksisthatthiscohortisextremelywellpositionedtoleadtheindustryasstrongcompoundersonthemetricsthatmattermostforoutperformanceforyearstocome.Inmostindustries,itisthetoplinecompoundersthatgeneratethestrongestreturnsforshareholdersovertimeassumingthatthevaluationofthosestocksarenotalreadyassumingtoorosyofascenario.Asitrelatestobankstocks,however,withverylittlegrowthmoneyinthesector,wefindthatourstrongestcompounderstradeatveryinexpensivevaluations.Infact,ifonewastocomparetothegrowthratesoftheaforementionedcohortofbankstobankswithsimilargrowthcharacteristicsinothersectors,onewouldfindthatournichegrowthbankstradeata60%discounttohighergrowthnon-banks.Givensuchawidemarginofsafetyintermsofvaluationcombinedwithsuperiorlong-termgrowthmetrics,weseethiscohortofbanksaspoisedtoleadthebroadermarketsforyearstocome.Tothatend,however,giventhatweonlycoverahandfulofbanksthatexcelinthecombinationofclientexperienceandgrowth,hopefullyourupdateddeepdiveintoclientsatisfactionrevealsanevenlongershoppinglistforinvestors.

BasedonourupdatedMoneyMakingPlaybook,thisishowwewouldallocate$1,000acrossourcoverageuniverse:

Figure2:ShadesofGreenAllocation–$1,000RankedGroupAllocation

Source:J.P.Morganestimates.Starsrepresentfounder-ledbanks.EventhoughSI’sCEOAlanLanewasnotthefounderofSilvergate,weconsiderhimthefoundergiventhathebuiltthecompany

fromthegroundup.Note:Thesepointallocationsreflectourshort-termviews.Forourlong-termoutlooksandratings,pleaseseetheinvestmentthesissectionofourlatestcompanyresearchwhichcanbefoundon/.

8

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NorthAmericaEquityResearch

15June2022

DeepDiveonCustomerSatisfactionand

ShareholderReturns

ADeepDiveintoHowaBetterCustomerExperienceCan

DriveBetterBankShareholderReturnOverTime

Forbankinvestorslookingtogeneratealphainvestinginbankstocks,wepublishedourMoneyMakingPlaybookreportlastyeartoidentifythekeyfinancialmetricsthatmatteredmosthistoricallyforgeneratingoutsizedshareholderreturn.Afterstudyingeveryrelevantbankfinancialmetricacrossmultipletimeperiodsoverthepasttwodecades,wefoundthattherewereonlythreekeymetricsamongthetopbankstockperformersthatwereconsistentlybetterthanthebankstockunderperformers,whichincluded(1)revenuegrowth,(2)EPSgrowth,and(3)TBVgrowth.Alongsidethisabilitytodriveabovepeertoplinegrowth,whichpropelsbottomlinegrowthandTBV,wefoundthattherewasanon-financialmetricwherethetopstockperformersscoredhigherthanthebottomstockperformers:netpromoterscores.Thenetpromoterscoreisasimplemeasureforcustomersatisfactioninwhichcustomersareaskedwhethertheywouldrecommendthebanktotheirfamilyorfriends.Inotherwords,thisanalysisshowedthatbankswithhighercustomersatisfactionscorestendtodeliverabovepeersgrowthinrevenue,EPS,andTBV,aswellastotalshareholderreturn.Thissupportsourthesisthatthekeyforbankstostayrelevantinthedigitalageofbankingistoprovideacombinationofstateofthearttechnologyaswellashumanrelationshipsandservicetodeliveranoverallexceptionalcustomerexperience(whichshouldthenenablethebanktocapturemarketshareanddrivegrowthinthesekeyfinancialmetricswithouttakingoutsizedcreditrisk).Thisshouldallleadtoabovepeershareholderreturnsovertime.Inthisreport,weprovideananalysisofthelatest2022J.D.PowerRetailBankingSatisfactionStudywhichincludesnetpromoterscoresandJ.D.Power’sproprietarycustomersatisfactionscores(surveyperiodscove