KBW analyst Christopher McGratty rates First Midwest outperform and has a $12.50 price target on the stock.
He says that "the risk-reward remains favorable" because of relatively low stock price multiples, "particularly given the event-driven catalyst that may emerge," if the company pursues a bulk sale of nonperforming loans.
McGratty notes that First Midwest has a Tier 1 common equity ratio of 10.2% and a tangible common equity ratio of 8.9% as of June 30.
The analyst says that means the bank has more than enough capital "to absorb any potential capital hit." What's more, he says, a potential bulk sale of problem loans could "serve as a meaningful positive catalyst for the shares."
McGratty estimates that First Midwest will earn 44 cents a share for all of 2012, followed by EPS of a $1.00 in 2013.
First Midwest's shares closed at $11.52 Friday, which means they have gained 14% year to date, following a 12% decline during 2011.
The shares trade for 1.2 times their reported June 30 tangible book value of $9.30, and 13 times the consensus 2013 earnings estimate of 89 cents a share, among analysts polled by Thomson Reuters. The consensus 2012 EPS estimate is 45 cents.
Interested in more on First Midwest Bancorp? See TheStreet Ratings' report card for this stock.
-- Written by Philip van Doorn in Jupiter, Fla.