DES MOINES, Iowa --Regional banks and thrift stocks advanced Thursday on a day when and analyst upgraded four of the banks, saying they are better-positioned to ride out economic weakness.
B. Riley & Co. analyst Andrew Stapp said signs show the economic recovery slowing. While saying a recession doesn't appear imminent, Stapp said the likelihood of one is increasing.
The strong asset quality and profitability of some banks prompted him to boost his recommendation to "Buy" from "Neutral" on CVB Financial Corp., Home Bancshares Inc., PacWest Bancorp and Pinnacle Financial Partners Inc.
Stapp said a weakening in the economy will dampen loan demand and impair the ability of marginal borrowers such as small businesses and retail borrowers to meet their debt service. But he doesn't expect increases in loan loss provisions because most banks have addressed their asset quality issues.
A stalled recovery and particularly a double-dip scenario could hurt non-interest income, particularly for banks with sizable trust and wealth management operations.
Refinancing activity is not as brisk as some might think because many homeowners have already refinanced and large numbers are unable to qualify for mortgages, he said.
Stapp did trim earnings estimates slightly for many of the companies in the sector. A few examples: CVB Financial for next year was cut to 74 cents, down from 76 cents. Analysts surveyed by FactSet expect 78 cents.
For PacWest, the current year's and next year's earnings were reduced a penny a share to $1.27 for this year and to $1.12 for next year. Analysts expect $1.33 this year and $1.41 next year.
Shares of the banks generally rose Thursday, some by more than the broader market indexes. The Nasdaq exchange was up 1.3 percent and the Dow Jones Industrial Average was up 1.7 percent.
CVB Financial shares rose 18 cents, or 2 percent, to $8.53 and Home Bancshares rose 4 cents to $23.01.
PacWest Bancorp rose 42 cents, or 2.6 percent, to $16.47 and Pinnacle Financial was up 40 cents, or 3.6 percent, to $11.38.
Monday’s dip in the stock market could worsen problems for Philadelphia-area banks that are struggling to increase revenues and coping with increased compliance costs from the Dodd Frank financial services reform law.
Continue Reading >The fourth quarter saw banks’ capital-raising activity drop to its slowest pace in 2010 as concerns about some issuers’ credit quality and uncertainty about future capital standards kept a few transactions on the sidelines.
Continue Reading >Home BancShares Inc. (HOMB, $20.17, -$2.80, -12.19%) declined after it said its fourth-quarter loan-loss provisions should surge to $60M-$65M related to its Florida and Arkansas markets. A B. Riley analyst said it’s “concerning…that this late in the game [Home BancShares] is coming up with such losses.”
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