JPMorgan thinks it’s time to buy shares of North Carolina-based regional bank Live Oak Bancshares . Analyst Steven Alexopoulos upgraded the stock to overweight from neutral and maintained his price target of $40. That implies 46.2% upside over the next 12 months. Shares of Live Oak Bancshares are down more than 15% over the past month. Year to date, they have lost 9.4%. “The recent sell-off provides us with the entry point that we were waiting for,” Alexopoulos said in a Thursday note. “While LOB shares have underperformed over the past month in response to a rising 10-year yield, not only do we see a rising 10-year yield as providing a tailwind to the bank sector and LOB, but what’s more is that for LOB specifically, we see several near-term catalysts lined up.” The firm expects headwinds from a “liability sensitive” balance sheet to subside, while an “expense growth bubble” that started in 2022 deflates through year-end and beyond. Alexopoulos noted that Live Oak Bancshares faced intense pressure on deposit costs from interest rate hikes due to its concentration of internet deposits, but the bank is poised for net interest margin expansion as the Federal Reserve is expected to slow down its rate-hiking campaign. He added that Live Oak Bancshares earnings and valuation should benefit from a new checking deposit product and renewed focus under President BJ Losch, who was appointed to the role in late August. “With Live Oak now on a mission to cross-sell operating deposit accounts to its small business customers, we see a significant opportunity to improve its growth as well as return profiles,” the analyst said. — CNBC’s Michael Bloom contributed to this report.
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