Ahead of the Bell: Capitol Federal upgraded

NEW YORK (AP) — An analyst upgraded bank holding company Capitol Federal Financial Monday, predicting it will outperform its troubled finance-sector peers due in part to the stable credit quality of its loans.

Keefe Bruyette & Woods analyst Damon DelMonte raised his rating to "Market Perform" from "Underperform," but lowered his share price target to $30 from $34.

DelMonte's previous rating was not related to fundamentals, but was "purely a valuation call," he said in a note to investors. The stock is down 34 percent from its 52-week peak of $51.56 set in September.

The Topeka, Kan,-based bank has a non-performing loans to total loans ratio of 0.35 percent as of Dec. 31, while the bank's reserve for loan losses was $6.1 million, or 0.11 percent of its total loan portfolio.

DelMonte said the tangible common equity level, or what a bank would owe shareholders after paying off its creditors and depositors, was a healthy 11 percent of tangible assets.

Investors and analysts are now craving high levels of tangible common equity as banks' shares tumble and the government is forced to increase its support for major financial institutions. For example, Wells Fargo & Co., considered one of the stronger of the remaining big banks, had a tangible common equity of 2.9 percent of tangible assets as of Dec. 31.