UPDATE: JMP Securities Reiterates On Regional Management Corp Following Meetings

In a report published Wednesday, JMP Securities analyst David M. Scharf reiterated a Market Outperform rating on Regional Management Corp (NYSE: RM), and raised the price target from $20.00 to $21.00.

In the report, JMP Securities noted, “Following discussions with management, we believe the company continues to make progress managing collections activity at its branches through increased staffing, and we continue to anticipate loss rates will moderate modestly in the second half. Based on our expectation that charge-off rates will improve to approximately 8.8% in 2015 (compared to 9.6% in 2014), we are told that such a trend would likely lead to the allowance rate declining from a range of 6.5-7.0% to 6.0-6.5%. The resulting lower provision expense in our model of ~$4 million increases our EPS forecast in 2015 from $2.35 to $2.54.

"Separately, we understand that: 1) a non-rated auto securitization is still anticipated for 4Q; 2) the competitive environment within direct auto lending is not showing any signs of easing; and 3) while there are no regulatory developments to note, the company is working with third-party regulatory consultants to assess and advise on its marketing practices of insurance products, which represent extremely high margin revenue. Our new $21 price target remains based on ~8.5x our 2015 estimate.”

Regional Management Corp closed on Tuesday at $17.30.