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Citigroup Cuts Regional Banks

Stocks in this article: WFC HBAN KEY CMA ZION SIVB

Shares of KeyCorp (KEY) of Cleveland closed at $7.15 Thursday, declining 6% year-to-date, following a 12% decline during 2011. Based on a five-cent quarterly payout, the shares have a dividend yield of 2.80%.

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The shares trade for 0.8 times tangible book value, and for nine times the consensus 2013 EPS estimate of 82 cents. The consensus 2012 EPS estimate is 77 cents.

Levin rates KeyCorp a "Buy," although the analyst lowered his price target for the shares on Friday to $8.50 from $10.00, while leaving his 2012 EPS estimate unchanged at 70 cents and cutting his 2013 estimate by five cents to 80 cents, and his 2014 estimate by five cents to 85 cents.

The analyst estimates that KeyCorp's 2012 net interest margin will be 3.17%, declining to 3.13% in 2013 and 3.08% in 2014. Under the "flat rate scenario," the 2012 margin estimate is unchanged at 3.17%, followed by 3.12% in 2013 and 3.05% in 2014.

Levin that "despite the lack of catalysts, we think the stock is cheap," trading at "an ~15% discount to its peers on a price to tangible book value basis," and that given the discount to book value and a "Tier 1 Capital ratio of ~11.3% is above the peer group median of ~10.8%, we think KEY offers more downside protection than most of its peers in a market sell-off."

The analyst added that "longer term, how KEY deploys that capital will be a bigger driver of the stock's valuation."

Interested in more on KeyCorp? See TheStreet Ratings' report card for this stock.

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