Hilltop Holdings-HTH Shares Hit 52-Week Low: Time to Buy the Dip or Cut Your Losses?

Stock Performance - Hilltop Holdings Inc (HTH) shares hit a new 52-week low of $27 85 during Friday's trading session [1] - Over the past year, the stock has declined 18 7%, underperforming the industry, Zacks Finance sector, and S&P 500 index [1] - HTH stock has performed worse than its peers, Commerce Bancshares Inc (CBSH) and Hancock Whitney Corp (HWC) [1] Headwinds for Hilltop Holdings - Excessive reliance on fee-based revenues, with non-interest income accounting for 65% of total revenues, growing only 4 6% YoY in the first nine months of 2024 [2] - Deteriorating asset quality, with net charge-offs to average total loans increasing by 9 bps to 0 12% and non-accrual loans to total loans jumping 68 bps to 1 02% YoY [3] - Challenging macroeconomic outlook and anticipated increase in delinquencies likely to further deteriorate asset quality [4] - Subdued mortgage origination segment performance, with mortgage volumes declining 44 2% in 2022 and 34 9% in 2023, with the downtrend persisting in the first nine months of 2024 [7] - Mortgage origination volumes expected to remain subdued due to mortgage rates creeping back toward 7% [11] Supporting Factors for Hilltop Holdings - Relatively higher rates aiding net interest income (NII), with a CAGR of 1 5% over the five years ended in 2023 [12] - Net interest margin (NIM) increased to 3 09% in 2023 from 2 88% in 2022, expected to stabilize gradually as the Fed lowers interest rates [13] - Encouraging capital distributions, with total debt at$ 1 31 billion and cash and due from banks at $1 96 billion as of Sept 30, 2024 [16] - Regular dividend hikes since 2016, with an annualized dividend growth of 16 2% over the last five years [17] - Share repurchase plan with$ 55 2 million worth of authorization remaining as of Sept 30, 2024 [19] - Prudent expense management, with non-interest expenses reflecting a negative CAGR of 10 9% over the three years ended in 2023 [20] - Variable expenses expected to decline 1-3% in 2024 [22] - Bullish analyst sentiments, with the Zacks Consensus Estimate for 2025 earnings moving marginally upward to $1 55 per share [23] Final Thoughts - Prudent expense management and a solid balance sheet likely to support Hilltop Holdings' financials [26] - Relatively higher rates expected to aid NII, though higher funding costs may strain margin expansion [26] - Weak asset quality, subdued mortgage origination volumes, and high reliance on fee-based revenues remain major near-term headwinds [26]