Banks Fade: Winners & Losers (Update 1)
Updated with market close information.
NEW YORK (
) --
SunTrust
(STI) - Get Report
was the winner among the largest U.S. banking names on Friday afternoon, with shares rising over 1% to close at $23.01.
The broad indexes ended up mixed after European finance ministers agreed over the long weekend on a plan to prevent Greece from defaulting on more than ¿14 billion in bond redemptions due on March 20. Finance ministers in Brussels also finalized the 130 billion euro ($173 billion) package for Greece's second major bailout, with private investors forced to accept a 53% haircut on their Greek bond holdings, to cut the country's debt by about 100 billion euro.
Greece has agreed to budget cuts to lower its debt to 121% of its gross domestic product by 2020, which is a bitter pill for a country in its fifth year of recession.
|
The
The KBW Bank Index
(I:BKX)
dipped slightly to 45.55, with 17 out of 24 index components showing declines for the session.
SunTrust's shares have now returned 30% year-to-date, following a 40% decline in 2011.
The shares trade for 0.9 times their Dec. 30 tangible book value of $25.01, according to HighlineFI, and for 13 times the consensus 2012 earnings estimate of $1.73 a share, among analysts polled by Thomson Reuters.
Compass Point analyst Chris Gamaitoni on Feb. 9 upgraded SunTrust to a "Buy" rating, while raising his price target to $31 from $27, saying he expected "credit performance to continue to slowly improve and environmental costs
to begin to dissipate," adding that "positive trends in underlying fundamentals with the stock trading below tangible book value lead us to believe STI will experience material share appreciation to peer multiples as investors become comfortable with the banks position."
Gamaitoni lowered his 2012 earnings estimate for SunTrust to $1.72 from $1.81, and his 2013 EPS estimate to $2.90 from $2.95, because of "higher mortgage repurchase expense," but also said that "as STI exits the credit cycle, we believe STI can make $3.07 per share on a core basis."
Interested in more on SunTrust? See TheStreet Ratings' report card for this stock.
Shares of
Bank of America
(BAC) - Get Report
rose over 1% to close at $8.11.
The shares have risen 46% year-to-date, following a 58% decline in 2011, and traded for 0.7 times tangible book value.
Bank of America's shares trade for 11 times the consensus 2012 EPS estimate of 71 cents. The consensus EPS estimate for 2013 is $1.20.
With the shares seeing such a strong year-to-date run, BernsteinResearch analyst John McDonald was among several analysts recently downgrading Bank of America to a neutral rating, saying on Feb 15 that he continued to "see long-term upside in the shares," but that it would "take time for BAC's earnings power to recover amid low interest rates, loan runoff, and a long tail to elevated mortgage-related expenses."
For truly long-term investors who can commit for several years, while ignoring headlines and the endless stream of political bashing of pincushion banks, Rochdale Securities analyst Richard Bove believes Bank of America's shares
will hit $30 stock in three to four years
, saying in a recent interview that eventually there will be "t$3 in earnings power there and this stock can easily sell at 10 times earnings."
Interested in more on Bank of America? See TheStreet Ratings' report card for this stock.
Tuesday's financial loser was
Zions Bancorporation
(ZION) - Get Report
, with shares pulling back 2%, to close at $19.50, following a gain of over 8% the previous week.
The Salt Lake City lender still owes $1.4 billion in federal bailout funds received through the Troubled Assets Relief Program, or TARP, and "implied" during its Investor Day presentations last Thursday that it had submitted a TARP repayment plan to the Federal Reserve that would avoid a dilutive common equity raise, according to FBR analyst Paul Miller.
Miller on Tuesday reiterated his "Outperform" rating on Zions, and raised his price target for the shares to $22 from $20 saying with a $22 price target, although he said it "remains to be seen how the Fed will respond to this plan," since "most banks with a similar or larger amount of assets had to raise some common equity when paying off TARP."
Miller likes the company's prospects over the long term, since its operations in Utah, California and Texas "are projected to have decent population growth over the next several years, which should lead to above-average loan demand for Zions as a whole."
Meanwhile, Sterne Agee analyst Todd Hagerman on Monday reiterated his "Underperform" rating on Zions, with a price target of just $13, saying he was "cautious on the shares heading into the March capital review
following the Federal Reserve stress tests and potential for a larger than expected capital increase" to repay TARP," and that his price target "incorporates roughly a $600mm common equity raise in 2Q12."
Interested in more on Zions Bancorporation? 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.
