Brookline Bancorp's Earnings Outlook Raised, Buy Rating Preserved

2 min read | November 22, 2024 09:24 AM PST | By Team Kalkine Media

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Highlights:

Brookline Bancorp’s earnings are projected to dip in 2024 but are set to rebound in 2025 with a notable increase.

Subdued loan growth is anticipated due to the runoff in certain loan segments, while interest rate cuts and yield curve normalization will support margin improvements.

The company is expected to maintain a healthy dividend yield, providing steady returns for shareholders.

Brookline Bancorp (NASDAQ:BRKL) financial performance in 2024 is projected to see a slight decline, with earnings dipping by approximately 6% compared to the previous year. This downturn is primarily attributed to subdued loan growth. In the third quarter of 2024, the company’s loan growth slowed significantly, missing expectations, and annualized loan growth fell to 1.2%. This rate was lower than the earlier part of the year and below the company's historical average growth rate. The focus on commercial loans, particularly in equipment, real estate, and general business use, makes Brookline’s loan growth sensitive to broader economic trends.

While the company is experiencing weaker growth in certain loan segments, particularly in commercial real estate and specialty vehicle loans, demand for credit in the services sector remains robust. Despite this, the overall loan growth is expected to be subdued as the company anticipates limited increases in its portfolio due to runoff in some areas.

On a more positive note, Brookline Bancorp is likely to benefit from a more favorable net interest margin in 2025. The normalization of the yield curve, combined with anticipated rate cuts by the Federal Reserve, is expected to expand the company’s margin. With floating-rate loans accounting for a significant portion of its loan portfolio, and interest-bearing deposits similarly sensitive to rate movements, a decrease in interest rates is expected to provide margin relief. The net interest margin has already shown signs of improvement in the latter half of 2024, and further gains are expected through 2025.

Given these dynamics, Brookline’s earnings are projected to grow by approximately 20% in 2025, supported by improved margins and a stable operating environment. Additionally, the company’s dividend yield of 4.4% offers attractive income potential for stakeholders.

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