Keefe analysts retain Outperform rating on South State stock

Keefe, Bruyette & Woods reiterated an Outperform rating and $120 price target for South State Corporation (SSB), citing strong profitability metrics (1.3% ROA, 20% ROTCE) and robust capital levels (11% CET1). The firm highlighted the smooth integration of Independent Bank (IBTX), expected to boost growth in the second half of 2025, and SSB's ability to maintain a near-term NIM of 3.85-3.90% despite potential rate cuts. This positive outlook is supported by SSB's valuation at 9x estimated 2026 EPS, with Q1 2025 EPS of $2.15 and revenues of $630.64 million both exceeding expectations.

Analysis

Keefe, Bruyette & Woods reaffirmed its Outperform rating and a $120.00 price target for South State Corporation (NYSE:SSB), reflecting sustained confidence in the bank's strategy and financial health following recent management discussions. This positive outlook is underpinned by South State's robust profitability metrics, notably a return on assets (ROA) of 1.3% and a return on tangible common equity (ROTCE) of 20%, complemented by strong capital levels indicated by a common equity tier 1 (CET1) ratio of 11%. A significant catalyst is the smooth integration of Independent Bank of Texas (IBTX), with its system conversion set for completion, which is anticipated to materially enhance growth and profitability, particularly from the second half of 2025. Crucially, South State is projected to maintain a stable net interest margin (NIM) in the 3.85-3.90% range in the near term, even amidst potential interest rate reductions. This stability, coupled with strong Q1 2025 results where EPS of $2.15 significantly surpassed the $0.88 consensus and revenues of $630.64 million beat the $611.62 million forecast (with a NIM of 3.85% exceeding guidance), supports the favorable assessment. The stock trades at an appealing 9 times estimated 2026 earnings per share. Reinforcing this sentiment, Jefferies initiated coverage with a Buy rating and a $110 price target, while Citi, despite lowering its price target to $113 from $123, maintained a Buy rating, emphasizing the bank's strong credit profile and capital base. While the company has recently undertaken a securities restructure, a branch sale and lease-back transaction, and reported negative core loan growth trends, management has reaffirmed guidance for strong ROTCE and EPS growth, indicating strategic maneuvering within an evolving financial landscape.

Key Decisions for Investors

• Investors should consider South State Corporation's compelling financial performance, including its Q1 2025 earnings beat, strong profitability metrics (1.3% ROA, 20% ROTCE), robust capital position (11% CET1), and positive analyst consensus.
• The successful integration of Independent Bank (IBTX) is a key forward-looking catalyst expected to bolster growth and profitability significantly from H2 2025, and the current valuation at 9 times estimated 2026 EPS may present an attractive investment opportunity.
• While the overall outlook, including a resilient net interest margin projection, is positive, it is prudent for investors to monitor the observed negative core loan growth trends as a potential risk factor against the backdrop of management's optimistic guidance on ROTCE and EPS expansion.