This comprehensive analysis of Old National Bancorp (ONB), updated October 27, 2025, provides a multifaceted evaluation covering its business moat, financial statements, past performance, future growth, and fair value. The report benchmarks ONB against key competitors like Huntington Bancshares (HBAN), KeyCorp (KEY), and Comerica (CMA), distilling all findings through the proven investment frameworks of Warren Buffett and Charlie Munger.
Mixed.
Old National Bancorp is a stable regional bank that has grown significantly through a major merger.
The bank is successfully capitalizing on higher interest rates, which has driven strong revenue growth.
However, profitability is held back by poor cost control and a weak efficiency ratio of 62.8%.
Its recent merger also resulted in significant shareholder dilution and highly volatile earnings.
Future growth appears modest due to intense competition from larger, more efficient rivals.
The stock appears fairly valued, making it better suited for income investors than those seeking growth.
US: NASDAQ
Old National Bancorp (ONB) is a quintessential regional bank, operating a straightforward business model centered on traditional banking services. Its core function is to gather deposits from individuals and businesses and then lend that money out at a higher interest rate, earning the difference, which is known as net interest income. Headquartered in Indiana, ONB has a significant presence across the Midwest, particularly in states like Illinois, Indiana, Michigan, Minnesota, and Wisconsin. Following its transformative merger with First Midwest Bancorp in 2022, the bank significantly expanded its scale, especially in the competitive Chicago metropolitan area. The company's operations are primarily segmented into three main lines of business: Commercial Banking, which provides loans and treasury management services to small and medium-sized businesses; Retail Banking, offering deposit accounts, mortgages, and consumer loans to individuals; and Wealth Management, which delivers trust, investment advisory, and brokerage services to affluent clients. Together, these segments create a full-service financial institution tailored to the needs of its local communities, generating over 80% of its revenue from the fundamental spread between lending and deposit rates, with the remainder coming from fees for services.
Commercial and Industrial (C&I) and Commercial Real Estate (CRE) lending form the backbone of ONB's business, contributing the majority of its interest income. The bank offers a range of credit products, including lines of credit for working capital, term loans for equipment purchases, and various forms of real estate financing for both owner-occupied and investment properties. The market for commercial lending in the Midwest is vast but fragmented, with a steady but modest CAGR tied to regional economic growth. Profit margins in this segment are highly sensitive to interest rate fluctuations and credit quality. Competition is fierce, with ONB vying against money-center giants like JPMorgan Chase and Bank of America, super-regionals like U.S. Bancorp and PNC Financial, and a host of smaller community banks. Compared to a competitor like Wintrust Financial (WTFC), which has a deep, specialized focus on the Chicago market, ONB offers a more generalized approach across a broader geography. The primary consumers of these services are middle-market companies, typically with annual revenues between $10 million and $500 million. These clients often require tailored financial solutions and value long-term relationships, creating significant stickiness. The moat for ONB's commercial banking division is built on these relationships and its local market knowledge. Its bankers are embedded in their communities, allowing for more nuanced underwriting and personalized service than a large, centralized competitor might offer. This creates high switching costs for businesses that rely on their banker's understanding of their specific operational needs. However, this moat is vulnerable to economic downturns in the Midwest and aggressive pricing from competitors.
Retail banking provides the stable, low-cost funding that fuels ONB's lending operations and generates both interest and fee income. The bank's extensive network of approximately 270 branches serves as its primary deposit-gathering channel, offering checking accounts, savings accounts, money market accounts, and certificates of deposit (CDs). This segment also includes residential mortgage lending and other consumer loans. The U.S. retail banking market is mature, with growth driven by population and economic trends, while the mortgage market is highly cyclical. Competition is intense from all sides: large national banks with massive marketing budgets, digital-only banks offering higher deposit rates, credit unions with tax advantages, and non-bank mortgage lenders. ONB's mortgage market share is modest compared to national leaders like Rocket Mortgage or Wells Fargo. The customers are individuals and families within ONB's geographic footprint, who often choose their bank based on convenience, such as branch proximity, and trust. While digital banking has reduced the importance of physical locations, a local branch remains a key factor for many customers, especially for significant life events like securing a mortgage. The stickiness of these retail relationships is surprisingly high; the perceived hassle of changing direct deposits, automatic payments, and other linked services creates a powerful inertia that keeps customers from switching banks for minor rate advantages. ONB's moat in retail banking is its physical presence and long-standing brand reputation in its core markets, which fosters trust and provides a durable deposit base. The vulnerability lies in the ongoing shift to digital channels and intense price competition for both deposits and loans, which can erode margins.
Wealth Management is a smaller but strategically important business for ONB, contributing a significant and stable source of noninterest (fee-based) income. This division provides investment management, trust administration, and financial planning services primarily to high-net-worth individuals, families, and institutions. As of early 2024, ONB's wealth group managed billions in client assets, generating consistent fees regardless of interest rate movements. The market for wealth management services is growing, driven by intergenerational wealth transfers and an increasing need for professional financial advice. Profit margins are attractive, and the business is less capital-intensive than lending. Competition includes specialized private banks, independent registered investment advisors (RIAs), and the wealth divisions of major brokerage houses like Morgan Stanley and Charles Schwab. While ONB's wealth division is smaller than those of larger super-regional peers like Fifth Third (FITB) or KeyCorp (KEY), it benefits from its integration with the commercial and retail bank, receiving warm referrals from bankers who have long-standing relationships with clients. The target consumer is the affluent or emerging-affluent client, often a successful business owner who already banks with ONB. The stickiness of these relationships is extremely high. Trust is the cornerstone of the wealth management relationship, and clients are very reluctant to move their life savings to a new advisor. This creates a powerful moat for ONB's wealth business, built almost entirely on trusted, personal relationships and high switching costs. Its primary vulnerability is reputational risk and the challenge of attracting and retaining top-tier financial advisor talent, who are often recruited by larger, more prestigious competitors.
In conclusion, Old National Bancorp's business model is a resilient, time-tested formula for regional banking. Its strength is derived from its diversified operations across commercial, retail, and wealth management, which are deeply rooted in the communities it serves. The 2022 merger with First Midwest was a crucial strategic move that provided the necessary scale to compete more effectively in major markets like Chicago, enhancing its deposit base and lending capacity. This scale, combined with a dense branch network, creates a modest but effective moat built on customer relationships and switching costs. The bank's ability to serve as a one-stop shop for a middle-market business owner—providing a commercial loan for the business, a mortgage for their home, and wealth management for their personal assets—is a key competitive advantage that smaller banks cannot easily replicate.
However, the durability of this moat faces continuous pressure. The banking industry is undergoing a significant transformation, with digital adoption accelerating and competition intensifying from non-traditional players. While ONB's relationship-based model provides a buffer, it is not immune to these secular trends. The bank's profitability remains heavily tied to the net interest margin, making it susceptible to fluctuations in Federal Reserve policy and the broader economic health of the Midwest. Its challenge is to continue investing in technology to meet evolving customer expectations while preserving the high-touch, community-focused service that defines its brand. The business model is solid and likely to endure, but it is not exceptionally differentiated from its many regional peers, suggesting its performance will largely mirror that of the regional banking sector as a whole rather than consistently outperforming it.
Old National Bancorp's financial health is a tale of two opposing forces. On one hand, the bank's core revenue engine, net interest income, is performing exceptionally well, reaching $574.61 million in the third quarter of 2025. This growth reflects the bank's ability to capitalize on the higher interest rate environment. However, profitability metrics are less impressive. The bank's Return on Equity was 8.89% in the latest quarter, which is average, while its Return on Assets stood at a respectable 1.03%. A significant red flag emerged in the second quarter with a large provision for loan losses of $106.84 million, suggesting management anticipates potential credit deterioration ahead.
From a balance sheet perspective, the bank maintains a healthy funding profile. Its loan-to-deposit ratio was a solid 86.2% as of the last quarter, indicating that it is effectively using its deposit base to fund lending activities without being over-leveraged. However, there are underlying risks. The bank's tangible book value is being negatively impacted by unrealized losses in its securities portfolio, reflected in the -$524.39 million balance in 'comprehensive income and other.' This reduces the bank's tangible equity cushion. While the allowance for credit losses at 1.19% of total loans appears reasonable, key capital metrics like the CET1 ratio were not provided, leaving a gap in the risk assessment.
Operational efficiency has become a notable concern. The bank's efficiency ratio, a key measure of cost control, worsened to 62.8% in the most recent quarter, up from 57.7% for the full prior year. A ratio above 60% is typically considered inefficient and suggests that expenses are growing faster than revenue. This trend is unsustainable and could erode future profitability if not addressed. In conclusion, while Old National Bancorp's ability to grow interest income is a major strength, its financial foundation is showing cracks due to poor cost discipline and balance sheet pressures, making its current financial position appear risky despite the strong top-line performance.
Over the last five fiscal years (FY2020–FY2024), Old National Bancorp's performance has been overwhelmingly defined by its 2022 merger with First Midwest Bank. This transformative deal more than doubled the bank's assets, loans, and deposits, fundamentally reshaping its scale. While this demonstrates an ability to execute strategically important transactions, it makes year-over-year comparisons of organic growth challenging and has introduced considerable volatility into its financial results. The period is characterized by substantial balance sheet expansion, but this has been coupled with inconsistent earnings, significant shareholder dilution, and profitability metrics that remain average compared to higher-performing regional bank peers.
From a growth and profitability perspective, the track record is choppy. Revenue jumped from $774 million in FY2020 to $1.76 billion in FY2024, but this was driven almost entirely by the acquisition. Earnings per share (EPS) have been erratic, moving from $1.37 in FY2020 to $1.68 in FY2021, then down to $1.51 in the merger year of FY2022, up to $1.95 in FY2023, and back down to $1.69 in FY2024. This inconsistency reflects merger-related costs, fluctuating interest rate environments, and changing loan loss provisions. Profitability, measured by Return on Equity (ROE), has hovered around 9% to 11% in recent years. This is adequate but falls short of top-tier competitors like Wintrust or Commerce Bancshares, who often generate ROEs in the 12-14% range.
Cash flow has remained positive, consistently funding operations and shareholder distributions. Operating cash flow has been volatile but sufficient. In terms of shareholder returns, the story is one of stability at the expense of growth. The annual dividend has been held flat at $0.56 per share for the entire five-year period, providing a reliable income stream but no growth. The more significant factor for shareholders has been dilution. Diluted shares outstanding swelled from 166 million in FY2020 to 311 million by FY2024, with a massive 66.75% increase in FY2022 alone. This has significantly muted the creation of per-share value, and share buybacks have been too small to counteract this effect. Total shareholder returns have consequently lagged those of more efficient and organically growing peers.
In conclusion, Old National's historical record does not yet demonstrate consistent, high-quality execution on an organic basis. The bank has successfully scaled up its operations through a major acquisition, a significant accomplishment. However, its performance on core metrics like EPS growth and efficiency has been inconsistent. This track record suggests a competent M&A integrator but leaves questions about its ability to generate superior, stable returns for shareholders from its core business, especially when compared to the steadier performance of its strongest competitors.
The regional banking industry is navigating a period of significant change, with the next 3-5 years expected to be defined by three key trends: digital transformation, industry consolidation, and a challenging interest rate environment. Customer expectations have fundamentally shifted, with a strong preference for seamless digital and mobile banking experiences. This forces regional banks like ONB to invest heavily in technology to compete with the massive IT budgets of national players like JPMorgan Chase and the user-friendly platforms of fintech challengers. This technology race is a primary driver behind industry consolidation, as smaller banks merge to gain the scale needed to afford these investments and spread out rising compliance costs. The U.S. regional banking market is projected to grow at a modest CAGR of 2-3%, reflecting a mature industry where growth is tied closely to economic activity.
Several factors will shape demand and competition. A potential future easing of interest rates by the Federal Reserve stands as the most significant catalyst, which could reignite loan demand, particularly in the mortgage and commercial real estate sectors. Conversely, continued economic uncertainty could dampen business investment and borrowing. The competitive landscape is intensifying. While the high capital requirements and regulatory hurdles make starting a new bank difficult, competition from non-bank lenders and fintechs in specific product areas like payments, personal loans, and small business lending is increasing. These new entrants often compete on price and user experience, chipping away at the traditional banks' customer base. For incumbent banks like ONB, success will depend on their ability to leverage their established customer relationships and trust while modernizing their service delivery to meet the new digital standard.
ONB's core growth engine is its commercial lending division, which includes both Commercial & Industrial (C&I) loans for business operations and Commercial Real Estate (CRE) financing. Currently, consumption of these loans is constrained by the high-interest-rate environment, which has made borrowing for expansion or new projects expensive for its middle-market clients. This has led to softer loan demand across the industry. Over the next 3-5 years, consumption patterns are expected to shift. Growth will likely come from specialized industries that are resilient to economic cycles, such as healthcare and essential manufacturing, which are prominent in ONB's Midwest footprint. A decrease in borrowing for more speculative CRE projects is likely, while demand for financing for industrial and logistics properties could remain strong. The primary catalyst for increased loan consumption would be a sustained drop in interest rates, which would improve project economics for borrowers. The U.S. C&I loan market is valued in the trillions, with growth historically tracking GDP. ONB competes with super-regional banks like U.S. Bancorp and Fifth Third, who have larger balance sheets, and smaller community banks that offer highly localized service. ONB outperforms when it can leverage its deep, long-standing relationships with middle-market clients who require a balance of sophisticated services and personalized attention. However, it can lose deals to larger banks on price or to smaller banks that are more nimble. The key risk is a prolonged regional recession in the Midwest, which would directly impact the credit quality of its loan book and suppress demand. The probability of a moderate regional slowdown is medium, which could reduce loan growth to near zero and increase credit provisions.
Retail banking, centered on gathering deposits and providing mortgages, forms the foundation of ONB's balance sheet. Current consumption is characterized by a fierce competition for deposits, with customers moving funds to higher-yielding alternatives, putting pressure on the bank's funding costs. Mortgage demand is severely limited by high rates and housing affordability challenges. Looking ahead 3-5 years, the most significant change will be the continued shift from branch transactions to digital channels. Deposit growth will increasingly come from customers attracted by competitive rates and user-friendly digital tools, rather than branch convenience alone. Mortgage activity will see a significant increase if interest rates fall back into the 4-5% range, unlocking pent-up demand. The US mortgage origination market fluctuates wildly but could see volume double from current lows in a more favorable rate environment. ONB competes with national giants like Bank of America for retail customers and non-bank lenders like Rocket Mortgage, which dominates the mortgage market. ONB's advantage is its ability to bundle services for existing clients (e.g., a mortgage for a commercial banking client), creating sticky relationships. A major risk for ONB is failing to keep pace with the digital offerings of its larger competitors, which could lead to a gradual erosion of its retail deposit base. This is a medium probability risk, as tech investment is costly, and a failure here would directly increase funding costs and hurt profitability.
Wealth Management is a key strategic growth area for ONB, providing high-margin, stable fee income that is not dependent on interest rates. Currently, this division serves high-net-worth individuals and families, often sourced from the bank's commercial and retail client base. Growth is currently limited by intense competition for both clients and talented financial advisors. Over the next 3-5 years, consumption of wealth services is set to increase significantly, driven by the massive intergenerational transfer of wealth from the baby boomer generation. The demand for financial planning and trust services will rise substantially. The US wealth management market is projected to grow its assets under management (AUM) by 5-7% annually. ONB competes with large brokerage firms like Morgan Stanley, independent advisors, and the private banking divisions of larger competitors. ONB's advantage is its integrated model, offering a trusted, one-stop-shop for a client's banking and investment needs. The most significant risk in this segment is talent retention. If a team of high-performing advisors leaves for a competitor, they often take a substantial portion of their client assets with them. This is a medium-probability risk, as top talent is always in high demand, and such a departure would cause an immediate drop in fee revenue and AUM.
Finally, the integration of the First Midwest merger, completed in 2022, remains a central theme for ONB's future growth. The successful realization of projected cost synergies and revenue opportunities from this deal is critical to improving profitability and shareholder returns. While the most disruptive phases of integration are complete, the bank must continue to harmonize systems and cultures to operate as a single, efficient entity. Failure to achieve the targeted efficiencies would represent a significant setback to its growth story. Furthermore, as a bank with over $100 billion in assets, ONB faces a higher level of regulatory scrutiny and capital requirements than smaller peers. This increased compliance burden can act as a drag on growth, requiring the bank to hold more capital that cannot be deployed into new loans or returned to shareholders. Navigating this heightened regulatory environment while executing on its strategic goals will be a key challenge and determinant of its success over the next five years.
Based on the closing price of $20.62 on October 27, 2025, Old National Bancorp's valuation presents a mixed but generally fair picture. A triangulated approach using multiples, dividends, and asset values suggests the bank's shares are trading close to their intrinsic worth, with a fair value estimate in the $21.00–$23.50 range. This implies a modest upside of around 7.9% from the current price, indicating the stock is fairly valued with a limited margin of safety for new investors.
From a multiples perspective, ONB's trailing P/E of 12.43 aligns with the regional bank average, but its forward P/E of 8.34 points to strong anticipated earnings growth. For a bank, the most critical metric is Price to Tangible Book Value (P/TBV), which stands at 1.57x for ONB. This is right in line with the industry average of 1.5x and is supported by its slightly above-average Return on Tangible Common Equity (ROTCE) of approximately 13.9%. This suggests the market is pricing the bank's assets and profitability fairly compared to its peers.
The company's yield profile presents a major weakness. While the 2.66% dividend yield is sustainable with a conservative 33.07% payout ratio, it is slightly below the peer average. More concerning is the significant increase in shares outstanding, which creates a negative 'buyback yield'. This dilution of existing shareholders' ownership stakes counteracts the cash returns from dividends, diminishing the total capital return attractiveness.
In conclusion, the valuation is primarily anchored by the P/TBV multiple, which indicates a fair price relative to its tangible assets and profitability. While the forward P/E ratio offers potential upside if growth materializes, the negative impact of share dilution is a notable drawback. Combining these factors justifies a neutral to slightly positive view, positioning the stock as a reasonable holding for existing investors rather than a compelling buy for new ones.
Warren Buffett would view Old National Bancorp as an understandable but fundamentally average banking franchise. His investment thesis in banks centers on finding institutions with a durable, low-cost deposit base, disciplined underwriting, and scale advantages that lead to superior, consistent profitability. While Buffett would appreciate ONB's solid capital levels, with a CET1 ratio around 10%, he would be unimpressed by its mediocre profitability metrics, such as a Return on Assets (ROA) that consistently struggles to clear the 1.0% bar—a key indicator of a bank's efficiency and earning power. The primary risk is that ONB is caught between larger, more efficient super-regionals and smaller, niche community banks, leaving it without a strong competitive moat. In the 2025 economic environment, this average performance does not justify its valuation of ~1.2x tangible book value, which lacks the 'margin of safety' Buffett demands. Therefore, he would almost certainly avoid the stock. Forced to choose top-tier regional banks, Buffett would gravitate towards Commerce Bancshares (CBSH) for its fortress-like balance sheet and consistently high ROA of 1.2-1.4%, Wintrust Financial (WTFC) for its unique moat and ROA above 1.2%, and Fifth Third Bancorp (FITB) for its superior scale and efficiency driving an ROA over 1.1%. These companies exemplify the durable, high-return businesses he seeks. Buffett's opinion on ONB would only change if its stock price fell significantly, perhaps below its tangible book value, to offer a compelling bargain.
Bill Ackman would likely view Old National Bancorp as a solid, but ultimately uninteresting, regional bank that fails to meet his high bar for investment. Ackman's thesis for the banking sector would center on identifying simple, predictable, and dominant franchises that generate superior returns on capital, and ONB's performance metrics fall short. While its post-merger scale is respectable, its Return on Assets (ROA) frequently struggles to exceed 1.0% and its efficiency ratio in the low 60% range are middling compared to best-in-class peers who operate with ROAs above 1.2% and efficiency ratios in the 50s. The primary risk for Ackman would be owning a 'stuck-in-the-middle' bank that lacks the scale of super-regionals or the unique niche of more focused competitors. Therefore, Ackman would almost certainly avoid the stock, preferring to pay a premium for a higher-quality institution. If forced to choose top banks, Ackman would gravitate towards Wintrust Financial (WTFC) for its unique high-margin niche businesses, Fifth Third (FITB) for its dominant scale and efficiency, or Commerce Bancshares (CBSH) for its fortress balance sheet and elite 1.2%+ ROA, as these represent the quality he seeks. Ackman might reconsider ONB only if it demonstrated a clear and sustained path to achieving top-quartile profitability metrics, which seems unlikely in the current competitive landscape.
Charlie Munger would view Old National Bancorp (ONB) as a thoroughly average bank, and Munger had little interest in average businesses. He would start by looking for a durable moat and exceptional profitability, neither of which ONB possesses. Its Return on Assets (ROA) frequently falls below the 1.0% mark, a key indicator of mediocrity in banking, and its efficiency ratio in the low 60% range lags behind top-tier competitors who operate in the 50s. While the bank's valuation at around 1.2x price-to-tangible-book-value isn't excessive, Munger famously preferred buying a wonderful company at a fair price over a fair company at a wonderful price; ONB is a fair company at a fair price. He would conclude that ONB lacks the exceptional characteristics, such as a low-cost deposit franchise or a unique high-margin niche, that create long-term compounding value. For retail investors, the takeaway is that Munger would avoid ONB, seeking out demonstrably superior operators in the sector. If forced to choose the best regional banks, Munger would likely favor Wintrust Financial (WTFC) for its unique, high-profitability niche businesses driving a 1.2%+ ROA, Commerce Bancshares (CBSH) for its fortress-like balance sheet and conservative culture yielding a 1.2% - 1.4% ROA, and Fifth Third (FITB) for its superior scale and efficiency that produces a consistent ROA above 1.1%. A fundamental shift in ONB's business model that sustainably lifted its ROA above 1.2% without adding undue risk would be required for Munger to become interested.
Old National Bancorp solidifies its position as a significant super-regional bank, primarily serving communities throughout the Midwest. Its core strategy revolves around a relationship-based banking model, focusing on commercial lending and retail banking services for individuals and small-to-medium-sized businesses. The transformative merger with First Midwest Bancorp in 2022 significantly expanded its scale and market presence, particularly in the competitive Chicago metropolitan area. This move was crucial for ONB to remain competitive against larger players, providing opportunities for cost synergies and a broader platform for growth. However, the successful integration of such a large entity remains a key factor in its future performance and ability to realize promised efficiencies.
When compared to the broader competitive landscape, ONB's operational performance is generally average. The bank's profitability and efficiency ratios often trail those of best-in-class regional banks who benefit from greater economies of scale and more diversified revenue streams, such as larger wealth management or capital markets divisions. ONB's earnings are heavily dependent on net interest income—the spread between what it earns on loans and pays on deposits. This makes its profitability highly sensitive to fluctuations in interest rates, a common trait for traditional banks but a vulnerability that larger, more diversified competitors can better mitigate.
The primary challenge for Old National Bancorp is navigating an industry where scale is increasingly important. It is squeezed between giant national banks with massive technology budgets and smaller, nimble community banks with deep local ties. To succeed, ONB must effectively leverage its increased scale from the merger to invest in technology and improve its efficiency ratio, which measures costs as a percentage of revenue. Its ability to grow its loan book prudently while maintaining strong credit quality through economic cycles will be the ultimate determinant of its long-term value for shareholders. Investors are watching to see if management can successfully execute its strategy and close the performance gap with its higher-performing peers.
KeyCorp, another major Midwest-based regional bank, operates on a significantly larger scale than Old National Bancorp. KeyCorp's strategy is differentiated by its dual focus: a broad consumer and business banking franchise in its geographic footprint and a targeted national corporate and investment banking business. This structure provides it with more diverse revenue streams compared to ONB's more traditional, commercially-focused community banking model. While ONB competes on local relationships and personalized service, KeyCorp leverages its larger balance sheet and sophisticated product offerings, especially in commercial real estate and investment banking, to serve larger clients. This makes KeyCorp a formidable competitor for middle-market commercial clients, a key target for ONB.
In the analysis of Business & Moat, KeyCorp holds a significant edge. Its brand is stronger and more recognized nationally due to its corporate banking arm. On scale, KeyCorp's assets of ~$188 billion are nearly four times ONB's ~$49 billion. This scale allows for more significant investments in technology and product development. While both benefit from banking's inherent switching costs, KeyCorp's integrated platform for commercial clients, combining lending with capital markets and advisory services, creates a much stickier relationship. KeyCorp's network of branches is comparable in density within its core footprint, but its national business lines give it a reach ONB lacks. Regulatory barriers are high for both. Overall Winner: KeyCorp, due to its greater scale and diversified business model.
Financially, KeyCorp's performance profile is distinct from ONB's. KeyCorp's revenue mix includes a higher proportion of non-interest (fee) income, ~30-35% of revenue, compared to ONB's ~20-25%, making its earnings less sensitive to interest rate swings. However, KeyCorp's profitability can be more volatile due to its exposure to investment banking cycles. In recent periods, both banks have faced pressure on Net Interest Margins (NIM). KeyCorp's efficiency ratio is often in the ~62-65% range, sometimes higher than ONB's, reflecting the higher costs of its investment banking segment. Both banks maintain solid capital levels with CET1 ratios around 10%. KeyCorp's ROA has recently been challenged, sometimes dipping below 1.0% similar to ONB, as its funding costs have risen. Overall Financials Winner: A Draw, as KeyCorp's diversification is offset by higher cost structures and cyclicality, leading to similar recent profitability as ONB.
Looking at past performance, the comparison is nuanced. Over a five-year period, KeyCorp's total shareholder return has often been similar or slightly lagging ONB, partly due to investor concerns about its commercial real estate exposure and investment banking volatility. KeyCorp's revenue growth can be lumpier than ONB's more stable, interest-rate-driven growth. In terms of risk, KeyCorp's stock often exhibits higher volatility (beta) than ONB's because its earnings are tied to more cyclical industries. ONB's performance has been more of a slow-and-steady story, especially post-merger. Past Performance Winner: Old National Bancorp, for providing slightly more stable, albeit lower-growth, returns with less perceived cyclical risk in recent years.
For future growth, KeyCorp has more diverse potential drivers. These include its national healthcare and renewable energy financing niches, its Laurel Road digital platform for student loan refinancing, and its investment banking arm, which can capitalize on any rebound in M&A activity. ONB's growth is more narrowly tied to commercial loan demand in the Midwest and the successful extraction of synergies from its First Midwest merger. While ONB's path is clearer, KeyCorp's ceiling is higher if its specialized businesses perform well. Analysts often see more potential upside in KeyCorp's various segments, even if the execution risk is higher. Overall Growth Outlook Winner: KeyCorp, due to its multiple specialized growth avenues beyond traditional banking.
From a valuation standpoint, KeyCorp often trades at a lower multiple than ONB. For instance, KeyCorp might trade at a P/TBV of ~1.1x versus ONB's ~1.2x, and its P/E ratio is also frequently lower. This discount reflects the market's pricing-in of risks related to its commercial real estate portfolio and the cyclical nature of its investment bank. Both banks offer a high dividend yield, often exceeding 5% for KeyCorp, which can be attractive to income investors. The quality-versus-price argument is central here; KeyCorp offers diversification at a lower price, but with higher perceived risk. Better Value Today: KeyCorp, as its valuation discount appears to adequately compensate for its higher cyclical risks.
Winner: KeyCorp over Old National Bancorp. While ONB offers a more stable, traditional banking profile, KeyCorp's strategic diversification into national businesses and investment banking gives it a higher long-term growth potential. Its key strengths are its fee-income generation, which cushions it from interest rate volatility, and its specialized lending niches. Its notable weakness is the cyclicality and higher cost structure of its national businesses, which can lead to volatile earnings. ONB's primary risk is its lack of differentiation and scale in a crowded market. For investors willing to accept higher cyclicality, KeyCorp's discounted valuation and diverse growth drivers make it a more compelling choice.
Comerica Incorporated presents a unique comparison for Old National Bancorp, as it is a similarly sized bank by assets but with a very different business model. While ONB is a diversified regional bank with a strong retail and small business presence, Comerica is primarily a commercial bank focused on middle-market businesses, with a national presence in specific industries and a large deposit base in Texas, California, and Michigan. This makes Comerica less of a direct retail competitor but a major rival for the commercial loans that are the bread and butter of ONB's business. Comerica's asset-sensitive balance sheet also makes its earnings highly leveraged to changes in interest rates, often more so than ONB.
Regarding Business & Moat, Comerica has carved out a strong, defensible niche. Its brand is exceptionally strong within the national middle-market business community. While ONB's moat is its dense local network in the Midwest, Comerica's is its deep expertise in specific industries like technology, life sciences, and energy. On scale, both are in a similar asset class (~$70B for CMA vs. ~$49B for ONB), so neither has a massive scale advantage over the other. Switching costs are high for Comerica's clients, who are deeply integrated into its treasury management and specialized lending services. ONB's retail network effect is stronger in its core geography, but Comerica's industry-focused network is more valuable in its target markets. Overall Winner: Comerica Incorporated, due to its highly specialized and defensible national commercial banking niche.
In a financial statement analysis, Comerica's unique model creates different results. Because it gathers large, low-cost deposits from its commercial clients, Comerica's Net Interest Margin (NIM) expands significantly in a rising rate environment, often outperforming ONB. Its profitability, measured by ROA, can exceed 1.2% during favorable cycles, surpassing ONB's typical sub-1.0% figure. However, its model is also a weakness; it has a very high loan-to-deposit ratio, often over 90%, and its concentration in commercial loans makes it more vulnerable in an economic downturn. Its efficiency ratio is typically excellent, often below 60%, better than ONB's. Both maintain strong CET1 capital ratios. Overall Financials Winner: Comerica Incorporated, for its superior profitability and efficiency during positive economic cycles.
Historically, Comerica's performance has been more cyclical than ONB's. Its stock performance is highly correlated with the health of the commercial sector and the direction of interest rates. In periods of rising rates and economic expansion, Comerica's TSR has significantly outperformed ONB. Conversely, during economic scares or when rates fall, its stock has underperformed dramatically. ONB's performance has been less volatile and more tied to the general health of the Midwest economy. Comerica's 5-year revenue and EPS growth have been lumpier but have shown higher peaks than ONB's steadier trajectory. Past Performance Winner: A Draw, as Comerica offers higher-beta returns for cycle-aware investors, while ONB provides more stability.
Comerica's future growth is heavily dependent on macroeconomic factors. Its primary driver is commercial loan growth, which is tied to business investment and expansion in its key states and industry verticals. It has less exposure to consumer banking trends, a core focus for ONB. A key risk for Comerica is its exposure to potentially volatile sectors and its sensitivity to deposit outflows from large commercial clients seeking higher yields elsewhere. ONB's growth path, centered on integrating its merger and deepening its Midwest presence, is arguably more predictable, albeit with a lower ceiling. Overall Growth Outlook Winner: Old National Bancorp, for its more stable and predictable, if slower, growth profile.
Valuation often reflects Comerica's cyclicality, with its stock trading at a discount to peers during times of economic uncertainty. It is common to see Comerica trade at a lower P/E and P/TBV multiple than ONB, for example, a P/TBV of ~1.0x vs ONB's ~1.2x. This discount is the market's way of pricing in the higher risk of its concentrated commercial lending model. Its dividend yield is typically competitive. For a value investor, Comerica can look very cheap at the bottom of a cycle, but it's a bet on an economic recovery. ONB's valuation is generally more stable. Better Value Today: Comerica Incorporated, for investors with a bullish view on the U.S. economy, as its valuation offers more upside potential.
Winner: Comerica Incorporated over Old National Bancorp. Comerica's highly focused and profitable commercial banking model gives it a significant competitive edge in its chosen markets. Its key strengths are its superior profitability metrics (ROA, NIM) in favorable economic conditions and its deep expertise in niche industries, which creates a strong moat. Its notable weakness and primary risk is its high concentration in cyclical commercial loans and its sensitivity to interest rate and economic shifts, which leads to volatile performance. While ONB is a more stable and diversified bank, Comerica's specialized model, when performing well, generates superior returns, making it the winner for investors comfortable with its cyclical nature.
Fifth Third Bancorp is a super-regional banking powerhouse and a direct, formidable competitor to Old National Bancorp across many key Midwest markets, including Ohio, Illinois, and Indiana. With an asset base more than four times larger than ONB's, Fifth Third operates on a different scale, offering a comprehensive suite of products that spans retail banking, commercial banking, wealth management, and capital markets. This allows it to serve customers of all sizes, from individuals to large corporations. While ONB competes on its community-centric service model, Fifth Third leverages its massive scale, advanced digital platform, and strong brand recognition to capture significant market share.
When evaluating Business & Moat, Fifth Third is the clear winner. Its brand has near-national recognition and commands a top-5 deposit market share in many of its major metropolitan areas, a status ONB does not hold. The sheer scale of Fifth Third's operations (~$210B in assets vs. ONB's ~$49B) provides substantial cost advantages and a larger lending limit. Both banks have sticky customer bases, but Fifth Third's integrated services, particularly its robust wealth and asset management division with over $500B in AUM, create much deeper and more profitable client relationships. Its branch and ATM network is far more extensive, producing a stronger network effect. Both are subject to the same strict regulatory environment. Overall Winner: Fifth Third Bancorp, due to its overwhelming advantages in scale, brand, and product breadth.
From a financial perspective, Fifth Third's scale translates directly into superior results. It consistently operates with a better efficiency ratio, often in the mid-to-high 50% range, compared to ONB's figures in the low 60s, meaning more of its revenue turns into profit. This drives stronger profitability, with Fifth Third's Return on Assets (ROA) typically well above 1.1%, a key benchmark of quality that ONB struggles to meet. Fifth Third also generates a higher percentage of its revenue from fee-based businesses (~35-40%), making its earnings more stable across interest rate cycles than ONB's. Both maintain robust capital positions, with CET1 ratios comfortably above regulatory requirements. Overall Financials Winner: Fifth Third Bancorp, for its demonstrably higher profitability and efficiency.
Fifth Third's past performance has been strong, reflecting its market leadership. Over the last 5- and 10-year periods, Fifth Third's total shareholder return has generally exceeded that of ONB. This is a direct result of its stronger earnings growth, driven by both organic expansion and strategic acquisitions. Fifth Third's revenue and EPS CAGR have been more consistent and higher than ONB's over the long run. On the risk front, while all bank stocks are cyclical, Fifth Third's diversified revenue streams provide more resilience during periods of compressed lending margins, arguably making it a lower-risk investment than the more concentrated ONB. Past Performance Winner: Fifth Third Bancorp, based on a track record of superior growth and shareholder wealth creation.
Looking ahead, Fifth Third's future growth prospects appear more robust and multifaceted. Key growth drivers include the expansion of its wealth management services, its fast-growing payment processing division (Worldpay from FIS partnership), and its push into high-growth Southeast markets like North Carolina and Florida. This contrasts with ONB's more traditional growth strategy of gaining commercial market share in the Midwest. Fifth Third's ability to invest heavily in technology, such as AI and data analytics, also positions it better for the future of banking. Analyst estimates typically forecast more reliable long-term earnings growth for Fifth Third. Overall Growth Outlook Winner: Fifth Third Bancorp, due to its superior diversification and presence in higher-growth markets and sectors.
Regarding valuation, Fifth Third typically trades at a premium to Old National Bancorp, and for good reason. Its P/TBV ratio might be ~1.6x compared to ONB's ~1.2x. This premium is warranted by its superior profitability (ROA), more diversified and higher-growth business model, and greater scale. While ONB might offer a slightly higher dividend yield at times, the overall quality gap is significant. An investor is paying a higher price for a much higher-quality asset in Fifth Third. The phrase "you get what you pay for" applies well here. Better Value Today: Fifth Third Bancorp, as its premium valuation is justified by its superior financial profile and growth prospects, making it a better risk-adjusted value.
Winner: Fifth Third Bancorp over Old National Bancorp. Fifth Third is the unequivocally stronger company and a superior investment choice. Its key strengths are its commanding scale, diversified revenue streams that produce industry-leading profitability (1.1%+ ROA), and a clear strategy for growth in attractive markets and business lines. ONB's notable weakness is its inability to match the scale, efficiency, and product depth of a competitor like Fifth Third. The primary risk for an ONB investor is that the bank will be perpetually outmaneuvered and unable to close the profitability gap with larger rivals. Fifth Third's dominance in shared markets makes it the clear winner.
Associated Banc-Corp is one of Old National Bancorp's closest peers in terms of size and geographic focus, with a heavy concentration in Wisconsin, Illinois, and Minnesota. Both banks follow a classic regional banking model centered on commercial lending and retail services. This makes the comparison particularly direct, as they often compete for the same customers in key markets like Chicago. Associated's strategy involves leveraging its long-standing presence in Wisconsin while seeking to expand its commercial and industrial (C&I) lending and specialized banking services. This sets up a head-to-head battle where execution and local market share are paramount.
In Business & Moat, the two are very evenly matched. Both have strong, century-old brands in their home markets (Associated in Wisconsin, ONB in Indiana). In terms of scale, they are close competitors, with Associated's assets at ~$41 billion compared to ONB's ~$49 billion. The recent ONB merger with First Midwest gives it a slight edge in overall size and a stronger position in the Chicago market. Both banks benefit from entrenched customer relationships and high switching costs. Their network effects are comparable within their respective core territories. Regulatory barriers are identical for both. Overall Winner: Old National Bancorp, by a narrow margin, due to the greater scale and enhanced Chicago presence gained from the First Midwest merger.
Financially, the two banks often post similar headline numbers, but with some key differences. ONB has recently achieved a slightly better efficiency ratio, often in the low 60s, while Associated's has sometimes trended into the mid-60s, indicating ONB is running a slightly leaner operation post-merger. Profitability measured by ROA is often similar for both, typically in the 0.8% to 1.0% range, which is average for the industry. A key differentiator can be credit quality; Associated has historically maintained very strong credit metrics but has a notable concentration in commercial real estate, which can be a risk. Both are well-capitalized with CET1 ratios above 10%. Overall Financials Winner: Old National Bancorp, due to its slightly better efficiency and more diversified loan book compared to Associated's CRE concentration.
A review of past performance shows a very close race. Over various time frames (1, 3, and 5 years), their total shareholder returns have often been highly correlated, moving in lockstep with investor sentiment toward regional banks. Neither has been a standout growth story, with revenue and EPS growth for both largely driven by M&A and the interest rate cycle rather than strong organic expansion. In terms of risk, their stock volatility and drawdowns during periods of stress have been quite similar. This reflects their similar business models and exposure to the economic health of the Midwest. Past Performance Winner: A Draw, as neither has established a clear, sustained performance advantage over the other.
Looking at future growth drivers, both banks face a similar, challenging environment. Both are focused on growing their C&I loan portfolios to capture more business from the region's industrial base. Associated is making a push into specialized verticals like asset-based lending, while ONB is focused on capitalizing on its larger scale to win bigger clients in Chicago and other metro areas. Neither has a game-changing growth catalyst on the horizon; their growth will likely be incremental and hard-fought. Analyst expectations for both are typically for low-to-mid single-digit earnings growth, in line with regional GDP growth. Overall Growth Outlook Winner: A Draw, as both have similar, modest growth prospects tied to the Midwest economy.
From a valuation perspective, Associated Banc-Corp and Old National Bancorp are often valued nearly identically by the market. They tend to trade at very similar P/E and P/TBV multiples, for example, both hovering around 1.1x - 1.2x P/TBV. Their dividend yields are also typically within a few basis points of each other, usually in the 4-5% range. There is rarely a compelling valuation argument to choose one over the other. The choice comes down to a slight preference for ONB's larger scale and better Chicago presence versus Associated's deep Wisconsin roots. Better Value Today: A Draw, as the market correctly values them as very close peers.
Winner: Old National Bancorp over Associated Banc-Corp. In a contest between two very similar regional banks, ONB takes the victory by a nose. Its key strength is the enhanced scale and market position in Chicago gained from its transformative merger with First Midwest. This gives it a slight edge in competing for larger commercial clients and achieving cost efficiencies. Associated Banc-Corp's primary risk is its significant concentration in commercial real estate, which could become a headwind in a downturn. While both are solid, comparable banks, ONB's larger and more diversified platform makes it the marginally better-positioned of the two.
Wintrust Financial Corporation is a unique and direct competitor to Old National Bancorp, especially following ONB's merger with First Midwest, which significantly increased its presence in Wintrust's home turf of the Chicago metropolitan area. Wintrust's strategy differs from a typical regional bank; it operates as a holding company for over 15 separate community bank charters, each with its own local branding. This allows it to project a 'small bank' feel while benefiting from the scale of a larger organization. It also has several profitable, niche national lending businesses, such as insurance premium financing and commercial equipment leasing, which provide diversification.
Regarding Business & Moat, Wintrust has a very effective and defensible model. Its multi-charter structure creates a strong local brand identity (e.g., 'Lake Forest Bank & Trust') that resonates with customers, giving it a perceived edge in community banking over a single-branded entity like ONB. In terms of scale, Wintrust is slightly larger, with assets over ~$56 billion compared to ONB's ~$49 billion. Wintrust's primary moat is its specialized national lending platforms, particularly its dominant position in insurance premium financing, which generates high-return, low-risk loans and significant fee income. This business is a key differentiator that ONB cannot match. Overall Winner: Wintrust Financial Corporation, due to its unique, effective branding strategy and its highly profitable national lending niches.
From a financial standpoint, Wintrust has consistently been a stronger performer than ONB. Wintrust regularly generates a higher Return on Assets, often exceeding 1.2%, placing it in the upper quartile of regional banks and well ahead of ONB's sub-1.0% results. This superior profitability is a direct result of the high yields from its niche lending businesses. Wintrust has also demonstrated more consistent revenue growth. Its efficiency ratio is typically in the high 50% range, superior to ONB's 60%+ figure. Both banks are well-capitalized, but Wintrust's ability to generate higher internal capital through earnings gives it more flexibility. Overall Financials Winner: Wintrust Financial Corporation, for its superior profitability and growth track record.
Analyzing past performance, Wintrust has been a clear outperformer. Over the past five and ten years, Wintrust has generated a significantly higher total shareholder return than Old National Bancorp. This reflects its consistent, above-peer-average earnings growth. Wintrust has a long and successful track record of making small, tuck-in acquisitions of other Chicago-area banks and extracting value from them, a strategy it executes with precision. Its 5-year EPS CAGR has been in the double digits, far outpacing ONB's growth. In terms of risk, Wintrust's niche businesses are not without cyclicality, but its overall performance has been less volatile than many peers. Past Performance Winner: Wintrust Financial Corporation, based on its outstanding long-term record of growth and shareholder returns.
For future growth, Wintrust continues to appear well-positioned. Its growth drivers are clear: continued market share gains in the attractive Chicago market, expansion of its niche national lending businesses, and the potential for further accretive M&A. The company has a well-defined playbook for growth that has worked for decades. ONB's growth is more dependent on making its large-scale merger with First Midwest a success and competing in the same crowded Chicago market, but without the unique product advantages that Wintrust possesses. Analysts generally project higher long-term growth for Wintrust. Overall Growth Outlook Winner: Wintrust Financial Corporation, for its proven, multi-pronged growth strategy.
In terms of valuation, the market recognizes Wintrust's superior performance, and it typically trades at a premium to ONB. Wintrust's P/TBV multiple is often in the ~1.6x-1.8x range, compared to ONB's ~1.2x. This is a significant premium, but it reflects Wintrust's higher profitability (ROA), stronger growth history, and unique business model. Its dividend yield is usually lower than ONB's, as it retains more capital to fund its growth. For an investor, ONB is the 'cheaper' stock on paper, but Wintrust offers a clear case of paying a fair price for a superior company. Better Value Today: Wintrust Financial Corporation, as its premium is justified by its consistently high performance, making it a better risk-adjusted value.
Winner: Wintrust Financial Corporation over Old National Bancorp. Wintrust is a higher-quality banking franchise with a superior business model and a stronger track record of execution. Its key strengths are its highly profitable niche national lending businesses, its unique multi-brand strategy that drives market share in Chicago, and its consistent history of delivering superior growth and profitability (1.2%+ ROA). ONB's weakness in this comparison is its more generic business model that lacks the high-margin, differentiated revenue streams that Wintrust enjoys. The primary risk for ONB is that it will struggle to compete effectively against Wintrust in the critical Chicago market. Wintrust is the clear winner and a top-tier regional bank.
Based on industry classification and performance score:
Old National Bancorp operates a classic regional banking model, primarily serving communities across the Midwest through commercial lending, retail banking, and wealth management. Its primary strength lies in its entrenched local relationships and extensive branch network, which secure a stable, low-cost deposit base—the lifeblood of any bank. However, the bank faces intense competition from larger national players and more nimble local banks, and its reliance on interest-rate sensitive businesses presents a persistent risk. For investors, the takeaway is mixed; ONB has a solid, durable business but lacks a standout competitive advantage or 'moat' that would guarantee superior long-term performance against its many rivals.
The bank has a respectable mix of fee-based revenue, primarily from wealth management and service charges, which helps cushion its reliance on interest income.
A balanced revenue stream is key to weathering different economic cycles. In the first quarter of 2024, ONB's noninterest income comprised approximately 25.7% of its total revenue, a healthy contribution that is IN LINE with the 20-30% average for its sub-industry. This fee income is also reasonably diversified across several sources, with wealth management fees ($28.2 million), service charges ($30.8 million), and capital markets income ($17.5 million) being the largest contributors. This mix reduces the bank's dependence on its net interest margin, which can be volatile. The strong, recurring revenue from the wealth management division is a particular strength. While mortgage banking income ($8.6 million) was lower due to the high-rate environment, the other segments provide a stabilizing counterbalance. This level of diversification is a strategic advantage and supports a 'Pass' rating.
ONB shows a healthy and diversified deposit base, with a low reliance on risky, less stable funding sources like brokered deposits.
Old National exhibits a well-diversified mix of depositors, which is a significant strength that mitigates concentration risk. The bank's funding is sourced from a broad base of retail (consumer) and commercial customers across its geographic footprint. Critically, ONB has minimal reliance on brokered deposits, which are funds sourced through third-party brokers that are typically more expensive and less loyal than core customer deposits. Keeping this percentage low is a hallmark of a disciplined, relationship-focused bank. While specific percentages for retail versus small business deposits are not always disclosed, the overall loan portfolio mix suggests a balanced approach. This broad customer base reduces the risk that the departure of a few large depositors could create a liquidity crisis. This disciplined funding strategy is a clear positive and places ONB ABOVE many peers who may rely more heavily on wholesale funding. Therefore, this factor earns a 'Pass'.
ONB operates as a generalist commercial bank, lacking a distinct, market-leading niche that would provide a strong competitive advantage or pricing power.
While specialized expertise can create a powerful moat, Old National's lending strategy appears to be that of a diversified generalist rather than a niche specialist. Its loan portfolio is spread across Commercial & Industrial (C&I), Commercial Real Estate (CRE), and consumer lending, without a heavy or dominant concentration in a specific area like SBA lending or agriculture. For instance, owner-occupied CRE, a typically lower-risk segment, makes up a solid but not defining portion of its portfolio. The bank's strength lies in its broad service to middle-market businesses across the Midwest, leveraging relationships rather than a unique product focus. This diversification is a defensive positive, reducing risk from a downturn in any single industry. However, it also means ONB lacks the pricing power and deep competitive moat that a true niche leader, like a top SBA lender, might enjoy. This lack of a defining specialty means it competes on general service and price, which is a tougher proposition. Because it doesn't possess a distinct lending franchise that sets it apart from numerous competitors, this factor receives a 'Fail'.
The bank maintains a decent, but not exceptional, base of low-cost deposits, which is facing pressure from the higher interest rate environment.
A bank's strength is often measured by its ability to attract and retain low-cost, stable deposits. As of Q1 2024, ONB's noninterest-bearing deposits made up 24% of its total deposits. This is a crucial metric as these deposits are essentially free funds for the bank to lend. This level is slightly BELOW the typical regional bank average, which often sits closer to 28-30%. Furthermore, its cost of total deposits stood at 2.16%, reflecting the industry-wide pressure to pay more to retain customers in a high-rate environment. On a positive note, estimated uninsured deposits were around 35% of total deposits, a manageable level that is IN LINE with or slightly better than many peers, reducing the risk of deposit flight during periods of market stress. While the deposit base is generally stable due to long-term relationships, the composition is less favorable than top-tier competitors, leading to higher funding costs. This weakness makes the bank more vulnerable to margin compression, justifying a 'Fail' rating.
ONB's large, strategically-placed branch network provides a solid foundation for gathering deposits, though its efficiency on a per-branch basis is average for its peer group.
Old National operates a substantial network of around 269 branches across the Midwest, a key asset in its relationship-based banking model. With approximately $37.7 billion in total deposits, the bank averages about $140 million in deposits per branch. This figure is respectable and generally IN LINE with the sub-industry average for regional banks of its size, which typically ranges from $100 million to $200 million per branch. While not a standout leader in branch efficiency, the network's value lies in its geographic density in core markets like Indiana and its expanded presence in metropolitan Chicago post-merger. This physical footprint is crucial for attracting and retaining small business and retail customers who still value in-person service, thus supporting its ability to gather stable, low-cost core deposits. However, maintaining such a large physical network comes with significant overhead costs, posing a challenge to operating leverage. The bank's performance here is solid but not superior, warranting a 'Pass' based on the scale and strategic importance of the network.
Old National Bancorp's recent financial statements present a mixed picture for investors. The bank demonstrates strong revenue growth, with net interest income climbing 46.7% in the latest quarter, driven by higher interest rates. However, this strength is offset by significant weaknesses, including a deteriorating efficiency ratio, which recently hit a weak 62.8%, and a large provision for loan losses in the second quarter. The balance sheet also shows stress from unrealized losses on its investment portfolio. The investor takeaway is mixed, as robust revenue generation is currently clouded by rising expenses and potential credit risks.
The bank's liquidity appears solid with a healthy loan-to-deposit ratio, but missing key capital data like the CET1 ratio makes a full assessment of its strength impossible.
Old National Bancorp displays a solid liquidity position based on available metrics. Its loans-to-deposits ratio in the most recent quarter was 86.2% (calculated from $47,396 million in net loans and $55,006 million in deposits). This is within the ideal 80-90% range for regional banks, showing a good balance between lending out deposits to earn interest and maintaining enough liquidity. The bank is not overly reliant on wholesale funding to support its loan growth, which is a positive sign of a stable funding base.
However, a complete picture of its capital adequacy is unclear due to missing information. Crucial metrics such as the Common Equity Tier 1 (CET1) ratio and the percentage of uninsured deposits are not provided. The Tangible Common Equity to Total Assets ratio is 7.2%, which is adequate but not exceptionally strong. While the healthy loan-to-deposit ratio is a strength, the absence of regulatory capital figures is a major blind spot for investors trying to gauge the bank's ability to withstand financial stress.
While the bank's loan loss reserve appears adequate, a large, recent increase in provisions for credit losses and a lack of data on actual loan performance raise serious red flags.
The bank's readiness for credit losses presents a mixed and concerning picture. On the positive side, its allowance for credit losses stood at 1.19% of gross loans in the last quarter ($572.18 million in allowance vs. $47,968 million in loans). This level of reserves is generally considered adequate for a regional bank and is in line with industry standards. It suggests a baseline level of preparation for potential defaults.
However, recent actions and missing data are significant causes for concern. The bank recorded a very high provision for loan losses of $106.84 million in the second quarter of 2025, which is nearly as much as the provision for the entire previous year ($110.62 million). This sharp increase signals that management expects credit quality to worsen. Critically, data on nonperforming loans (NPLs) and net charge-offs is not available. Without knowing the actual level of bad loans and write-offs, investors cannot determine if the increased provision is a proactive measure or a reaction to rapidly deteriorating credit, making this a significant risk.
The bank's tangible equity is being significantly eroded by unrealized losses on its securities portfolio, creating a notable vulnerability to interest rate changes.
Old National Bancorp's balance sheet shows significant sensitivity to interest rates, primarily through its investment portfolio. As of the third quarter of 2025, the bank reported -$524.39 million in 'comprehensive income and other,' which largely represents unrealized losses on securities. This figure accounts for over 10% of the bank's tangible common equity ($5,139 million), indicating a material reduction in its high-quality capital base due to these paper losses. While these losses are only realized if the securities are sold, they reduce the bank's financial flexibility and can signal future pressure on earnings.
This situation is common for banks in a rising-rate environment, but the magnitude of the impact here is a concern. The lack of specific data on the duration of the securities portfolio or the mix of fixed- versus variable-rate loans makes it difficult to fully assess the risk. However, the existing data clearly shows that mark-to-market losses on its investments are a significant headwind, justifying a cautious stance on its asset-liability management.
The bank is successfully leveraging the higher interest rate environment, posting very strong growth in net interest income, which is the primary driver of its recent performance.
The bank's core earning power from its lending and funding activities appears robust. In the third quarter of 2025, Net Interest Income (NII) — the difference between what the bank earns on loans and pays on deposits — grew by a very strong 46.69% year-over-year to reach $574.61 million. This indicates the bank is effectively managing its assets and liabilities in the current interest rate environment, likely by repricing its loans at higher rates faster than its deposit costs are increasing.
While the specific Net Interest Margin (NIM) percentage is not provided, the powerful growth in NII is a clear positive signal. It serves as the main engine for the bank's overall revenue growth, which was up 47.83% in the same quarter. This performance suggests healthy loan demand and disciplined pricing, which are fundamental strengths for any bank. As long as the bank can maintain this momentum in its core spread-based business, it provides a solid foundation for earnings.
The bank's efficiency ratio is deteriorating and has crossed into weak territory, indicating poor cost control that is dragging down profitability.
Old National Bancorp is struggling with cost control, as evidenced by its weakening efficiency ratio. This ratio, which measures noninterest expenses as a percentage of revenue, climbed to 62.8% in the third quarter of 2025. This is a decline from 59.1% in the prior quarter and 57.7% for the full year 2024. A ratio above 60% is generally considered inefficient for a regional bank and indicates that costs are consuming too much of the bank's revenue.
The trend is more important than the single number. The consistent increase in this ratio suggests that expenses are growing faster than revenues, a pattern that is not sustainable for long-term profitability. In Q3 2025, total noninterest expense was $438.68 million, a significant jump from $378.95 million in Q2 2025. This lack of expense discipline is a clear operational weakness that needs to be addressed to protect the bank's bottom line.
Old National Bancorp's past performance is a story of transformation through a major acquisition, which significantly grew its balance sheet but resulted in a mixed track record. Strengths include consistent, albeit flat, dividend payments of $0.56 per share and successful management of a much larger loan and deposit base post-merger. However, this growth came at the cost of significant shareholder dilution, with shares outstanding nearly doubling, and highly volatile earnings per share, which fell -13.4% in fiscal 2024 after rising 29.3% in 2023. Compared to more consistent performers like Wintrust or Commerce Bancshares, ONB's record lacks stability. The investor takeaway is mixed; the bank has proven it can execute large-scale M&A, but its organic performance and path to improved profitability are less clear.
The bank's loan and deposit base more than doubled following its 2022 merger, showcasing successful large-scale M&A execution, though this masks a lack of clear organic growth.
Old National's balance sheet history from FY2020 to FY2024 is a tale of two different banks: pre-merger and post-merger. Total deposits surged from $17.0 billion in FY2020 to $40.8 billion in FY2024, while net loans grew from $13.7 billion to $35.9 billion over the same period. The vast majority of this growth was inorganic, occurring in FY2022 with the First Midwest acquisition. While this makes it difficult to assess the underlying organic growth of the franchise, successfully integrating and managing a balance sheet of this increased size is a significant operational achievement.
A key sign of prudent management is the stability of the loan-to-deposit ratio post-merger. This ratio, which indicates how much of the bank's core funding is being lent out, stood at a healthy 87.9% in FY2024 ($35.9B in loans / $40.8B in deposits), consistent with prior years. This suggests the bank is not taking on excessive risk to expand its loan book and is managing its liquidity effectively.
Despite a massive increase in scale from its merger, Old National has failed to achieve consistent improvement in its efficiency ratio, which remains weaker than many key competitors.
A primary justification for large bank mergers is the potential for cost savings and improved efficiency. Based on its historical trend, Old National has struggled to fully deliver on this. The efficiency ratio measures how much it costs to generate a dollar of revenue; a lower number is better. In FY2021, prior to the merger's full impact, the ratio was high at 61.5%. It improved to 55.5% in FY2023 but then worsened to 57.7% in FY2024. This lack of a clear, sustained downward trend is disappointing.
While the bank's Net Interest Income (NII) has grown dramatically with its larger size (from $596 million in FY2021 to $1.53 billion in FY2024), its cost structure remains elevated. Competitors like Fifth Third and Wintrust consistently operate with better efficiency ratios, often in the mid-to-high 50s. This suggests that ONB has not yet translated its increased scale into a durable cost advantage, which is a key failure in its performance record.
The bank's earnings per share (EPS) track record is highly inconsistent and volatile, marked by sharp swings that reflect merger impacts rather than steady operational performance.
Old National's EPS performance over the past five years has been a rollercoaster, failing to show the consistent growth investors look for. After growing 22.8% in FY2021 to $1.68, EPS fell -10.2% to $1.51 in FY2022 due to merger-related expenses. It then surged 29.3% to $1.95 in FY2023 as synergies began to appear, only to fall again by -13.4% to $1.69 in FY2024 amid a shifting rate environment. This choppy performance makes it difficult to discern a clear earnings trend.
The bank's average Return on Equity (ROE) over the last three fiscal years was approximately 10.2%. While this is a decent level of profitability, it is not exceptional and lags stronger peers like Wintrust (WTFC) and Commerce Bancshares (CBSH), which have delivered more consistent and often higher returns. The lack of a stable growth path is a significant weakness in its historical performance.
Throughout its rapid expansion, Old National has demonstrated prudent risk management, with loan loss provisions and allowance levels remaining at reasonable and stable levels.
A crucial test for any bank undergoing a large merger is maintaining credit discipline. Old National appears to have managed this well. The provision for loan losses, which is money set aside to cover potential bad loans, has been manageable. In FY2024, the provision was $110.6 million on a $35.9 billion net loan portfolio, representing a reasonable 0.31% of loans. In FY2022, the year of the merger, the bank took a larger provision of $144.8 million, likely to build reserves for the acquired loan book, which is a sign of conservative accounting.
The bank's total allowance for loan losses stood at $392.5 million at the end of FY2024, covering 1.08% of its gross loans. This coverage ratio is solid and provides a good cushion against potential credit issues. While specific data on non-performing loans isn't provided here, the stable provisioning and solid allowance levels suggest a history of disciplined underwriting and effective credit risk management, even during a period of significant change.
ONB offers a stable dividend that has not grown in five years, but its capital return profile is severely weakened by massive shareholder dilution from its 2022 merger.
Old National has a long history of paying a consistent dividend, which stood at $0.56 per share annually for each of the last five fiscal years (FY2020-FY2024). This reliability is a positive for income-focused investors, and the payout ratio has remained sustainable, typically between 30% and 40%. However, the complete lack of dividend growth over this period is a significant weakness, suggesting that capital is being prioritized for other needs or that earnings growth is not strong enough to support increases.
The primary issue with ONB's capital return history is the enormous shareholder dilution from the First Midwest acquisition. Diluted shares outstanding exploded from 166 million in FY2021 to 277 million in FY2022, a 66.75% increase, and further drifted up to 311 million by FY2024. While share buybacks have occurred, they have been minimal (e.g., $8.88 million in FY2024) and nowhere near enough to offset this issuance. For long-term shareholders, this dilution has been a major drag on per-share value creation.
Old National Bancorp's (ONB) future growth outlook is mixed, leaning towards cautious optimism. The bank is poised to benefit from cost savings and expanded market reach following its large merger with First Midwest, and it has a solid plan to grow its fee-based businesses like wealth management. However, significant headwinds remain, including intense competition from larger national banks and pressure on its core lending profits due to high interest rates and a slowing economy. Compared to peers, ONB's growth will likely be steady but unspectacular, driven more by operational efficiency than aggressive expansion. For investors, this suggests a stable but modest growth trajectory over the next 3-5 years.
The bank faces a challenging environment for loan growth, with high interest rates and economic uncertainty likely to keep borrowing demand subdued across its key markets.
While ONB serves stable Midwest economies, its loan growth prospects are constrained by the broader macroeconomic climate. Management's guidance for loan growth is typically in the low-single-digits, reflecting cautious sentiment among its commercial and consumer clients. High interest rates have made new projects and investments less attractive for businesses, and the housing market remains slow. While the bank's loan pipelines remain active, the pace of new originations is unlikely to accelerate meaningfully until there is a clearer path to lower interest rates. This external pressure on its primary revenue-generating activity presents a significant headwind to overall growth.
Having completed a major merger, ONB's focus has prudently shifted from large-scale acquisitions to integrating the new business and returning capital to shareholders through dividends and buybacks.
The First Midwest merger was a transformative event that significantly increased ONB's scale. Management's current priority is rightly focused on realizing the full value of that combination. The bank maintains a strong capital position, with a CET1 ratio comfortably above regulatory requirements, providing flexibility. While another large deal is unlikely in the near term, the bank has a history of strategic acquisitions. For the next few years, capital deployment will likely prioritize shareholder returns, including a consistent dividend and opportunistic share repurchases, which can boost earnings per share. This disciplined and shareholder-friendly approach to capital management is a strength.
The bank is executing a logical post-merger strategy of consolidating its physical branches to reduce costs while investing in the digital channels that customers increasingly prefer.
Following its merger with First Midwest, Old National is actively optimizing its physical footprint. This involves closing overlapping or underperforming branches to achieve cost synergies, a necessary step to improve efficiency in an industry where transaction volumes are shifting online. The bank's goal is to reinvest these savings into enhancing its mobile and online banking platforms to meet modern customer expectations. This dual approach of physical consolidation and digital investment is a standard and crucial strategy for regional banks seeking to protect their market share and improve their operating leverage. This clear and necessary execution plan supports a positive outlook for future efficiency.
ONB's profitability is under pressure as the cost of holding customer deposits has risen sharply, and this headwind is expected to limit the expansion of its net interest margin (NIM).
The net interest margin, a key measure of bank profitability, has been squeezed across the industry, and ONB is no exception. In the current high-rate environment, the bank has had to pay more on savings accounts and CDs to prevent customers from moving their money elsewhere. This has caused its cost of funds to rise faster than the yields on its loans and investments. While management expects some NIM stability as interest rates plateau, significant expansion is unlikely. The bank's deposit base, while solid, is not as heavily weighted towards noninterest-bearing accounts as some top-tier peers, making it more susceptible to this margin pressure, which directly constrains earnings growth.
The bank has a solid and growing base of fee-based revenue, particularly from wealth management, which provides a crucial buffer against the volatility of interest-rate-dependent earnings.
Old National has a stated goal of growing its noninterest income to create a more balanced and resilient revenue stream. Its wealth management division is a key driver of this, providing stable, recurring fees from assets under management. The bank is also focused on growing other fee sources like treasury management for business clients and capital markets services. This strategy reduces the bank's vulnerability to swings in net interest margin (NIM). With fee income already representing a healthy portion of total revenue (around 25%), the focused plan to expand these less cyclical businesses is a clear positive for future earnings quality and stability.
As of October 27, 2025, Old National Bancorp (ONB) appears fairly valued with potential for modest upside, trading at $20.62. Its attractive forward P/E ratio of 8.34 suggests expected earnings growth, and its valuation relative to tangible book value is reasonable. While the 2.66% dividend yield is respectable, significant shareholder dilution detracts from the total return profile. The overall takeaway is neutral to slightly positive, as the stock seems reasonably priced but lacks a compelling undervaluation catalyst.
The stock trades at a reasonable valuation relative to its tangible book value, especially when considering its solid profitability.
For banks, the Price to Tangible Book Value (P/TBV) is a crucial valuation metric. ONB's P/TBV is 1.57x (calculated from its price of $20.62 and its tangible book value per share of $13.15). This is very close to the 1.5x average for regional banks. This valuation is supported by the bank's Return on Tangible Common Equity (ROTCE), a key measure of profitability, which stands at an estimated 13.9%. This ROTCE is slightly better than the peer average of 13.0%, justifying a P/TBV multiple in line with or slightly above its peers. Since the bank is earning a solid return on its assets, the current market price appears justified.
The company's Price to Book value is well-aligned with its Return on Equity, indicating the market is pricing the stock rationally based on its profitability.
A bank's Price to Book (P/B) ratio should be justified by its Return on Equity (ROE). ONB currently has a P/B ratio of 1.02x (based on a price of $20.62 and book value per share of $20.64) and an ROE of 8.89%. A general rule is that a bank should trade at or above its book value if its ROE is near or above its cost of equity (typically 9-11%). Given that ONB's ROE is close to this threshold, a P/B ratio slightly above 1.0x is logical and does not suggest a misalignment. The more precise measure, P/TBV to ROTCE, also shows a reasonable alignment. Therefore, the stock appears to be priced appropriately for its current level of profitability.
The stock appears attractive based on a low forward P/E ratio, which suggests the market expects strong near-term earnings growth.
The company's trailing P/E ratio of 12.43 is in line with the regional banking industry average of 12.65. The more compelling metric is the forward P/E ratio of 8.34. A forward P/E that is substantially lower than the trailing P/E implies that analysts expect earnings per share (EPS) to grow significantly in the coming year. This potential for strong earnings growth makes the current price seem more attractive. While no explicit EPS growth forecast is provided, the sharp drop in the P/E multiple points towards positive momentum in profitability, making this a pass.
The respectable dividend is undermined by significant share dilution, resulting in a poor overall capital return to shareholders.
ONB offers a dividend yield of 2.66%, which is a decent source of income for investors. The payout ratio is a healthy 33.07%, meaning the company pays out about a third of its profits as dividends, which is sustainable. However, the analysis of capital return must also include share repurchases or issuances. The data shows a negative "buyback yield" (-14.14%), which means the number of shares has increased significantly. This shareholder dilution reduces each owner's stake in the company and offsets the cash returned via dividends. True value is created when a company returns capital through both dividends and net share buybacks; in this case, only one of those is happening.
ONB's valuation multiples are largely in line with regional banking peers, suggesting it is not overpriced relative to the sector.
A snapshot of key metrics shows ONB is trading in lockstep with its peers. Its trailing P/E of 12.43 is almost identical to the industry average of 12.65. Its Price to Tangible Book ratio of 1.57x is consistent with the 1.5x average for regional banks. While its dividend yield of 2.66% is slightly less than the peer average of around 3.31%, it is not an outlier. The stock's beta of 0.84 indicates it is slightly less volatile than the broader market. Overall, ONB does not appear significantly cheaper or more expensive than its competitors, meriting a pass for being fairly valued within its group.
The primary macroeconomic risk for Old National Bancorp stems from persistent high interest rates and the potential for an economic slowdown. A 'higher-for-longer' rate environment directly pressures the bank's net interest margin (NIM), a core measure of profitability. As the cost to attract and retain deposits rises, the bank's earnings on its loans may not keep pace, leading to margin compression. Looking to 2025 and beyond, an economic downturn would significantly increase credit risk. A rise in unemployment or business failures could lead to more loan defaults, particularly within its large commercial loan portfolio, which includes sectors like commercial real estate that are sensitive to economic cycles.
Within the regional banking industry, ONB faces intense competition and increasing regulatory demands. The 'war for deposits' is a major headwind, as the bank must compete not only with larger national banks but also with high-yield savings accounts and money market funds offering attractive rates. This dynamic forces ONB to pay more for its funding, shrinking its profitability. Furthermore, post-2023 banking turmoil, regulators are expected to impose stricter capital and liquidity requirements on banks of ONB's size (over $40 billion in assets). These new rules could constrain the bank's ability to grow its loan book, pursue acquisitions, or return capital to shareholders via dividends and buybacks.
From a company-specific perspective, ONB's reliance on acquisitions for growth presents integration risks. Its 2022 merger with First Midwest significantly increased its scale, but combining different banking cultures, IT systems, and risk management frameworks is a complex process that carries execution risk. Although the merger diversified its geographic footprint, the bank remains heavily concentrated in the Midwest, making it more vulnerable to a regional economic downturn than a nationally diversified competitor. Investors should monitor key credit metrics, such as the level of non-performing loans, and watch for any signs that asset quality is deteriorating as the loan portfolio seasons.
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