Bank of America: Citigroup Downgrade Loser
Updated with market close information.
NEW YORK (
) --
Bank of America
(BAC) - Get Report
was the loser among the largest U.S. bank holding companies on Tuesday, with shares declining over 3% to close at $7.98.
The broad indexes all pulled back after Moody's Investor Service cut its sovereign debt ratings for Italy and Spain -- which lost their coveted triple-A ratings -- as well as for Portugal, Slovakia, Slovenia and Malta. Bank stock prices were also weighed-down by some disappointing economic reports, including word from the Commerce Department that U.S. retail sales for January rose 0.4%, short of the expected 0.9% increase expected by economists polled by Thomson Reuters. The December sales figure was also revised, as unchanged from November.
|
The
The KBW Bank Index
(I:BKX)
declined over 1% to close at 44.32.
Citigroup analyst Keith Horowitz cut his rating on Bank of America's shares to "Neutral" from "Buy," saying that "at current levels the risk/reward tradeoff for BAC is relatively balanced in the near term.
Bank of America's shares have now returned 48% year-to-date, after falling 58% during 2011.
The shares still trade for a significant discount, at 0.7 times tangible book value, according to HighlineFI, but for a relatively high 11 times the consensus 2012 EPS estimate of 71 cents.
Despite the downgrade, Horowitz raised his price target for Bank of America to $8.50, and said that "BAC's recent outperformance reflects the market's increased comfort with its capital position, but at these levels we believe investor focus will shift to earnings, which have been weak."
The analyst said that consensus earnings estimates are "too high," and that his 2012 EPS estimate remained at just 50 cents, while his 2013 estimate of 70 cents was "well below consensus of $1.09."
Interested in more on Bank of America? See TheStreet Ratings' report card for this stock.
Shares of
SunTrust
(STI) - Get Report
pulled back nearly 3% on Tuesday, to close at $21.67.
SunTrust's have returned 22% year-to-date, after a 40% decline in 2011.
The Atlanta lender's shares still trade just under book value, according to HighlineFI, and for 13 times the consensus 2012 earnings estimate of $1.73, among analysts polled by Thomson Reuters.
Morgan Stanley analyst Betsy Grasek has an "Equal Weight" rating on SunTrust, with a price target of $25, saying last month after the company reported is fourth-quarter results that the "stock's tension is between uncertain
mortgage putback risk and improving efficiencies."
The company reported fourth-quarter mortgage production related losses of $62 million, compared to mortgage production income of $41 million in the third quarter. SunTrust also ts mortgage putback provisions, while also writing-down mortgage servicing rights, in anticipation of increased mortgage payoffs as borrowers take advantage of the Home Affordable Mortgage Program, or HARP.
Interested in more on SunTrust? See TheStreet Ratings' report card for this stock.
Shares of
Citigroup
(C) - Get Report
declined over 2% to close at $32.08.
The shares have now returned 22% year-to-date, after falling 44% in 2011.
While Citigroup now has a neutral view on Bank of America, BAC/Merrill Lynch analyst Guy Moszkowski still rates Citi a "Buy," with a $44 price objective, saying last Wednesday after a presentation by CFO John Gerspach, that "Citi has made significant progress" with the runoff of non-core assets placed in Citi Holdings, following CEO Vikram Pandit's "good bank/band bank" strategy of shoring up the company's balance sheet.
Over the long haul, Gerspach said that $64 billion in capital would be freed up, from the runoff of Citi Holdings and the recapture of $40 billion in deferred tax assets.
Mozkowski is behind the consensus, estimating that Citigroup will earn $3.93 a share in 2012, followed by EPS of $4.34 in 2013. Meanwhile, the average EPS estimate for 2012 is $3.98, followed by EPS of $4.76 for 2013.
Interested in more on Citigroup? See TheStreet Ratings' report card for this stock.
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Written by Philip van Doorn in Jupiter, Fla.
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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
