NEW YORK (
) - Which bank stocks do the analysts like least? There is one ranking system to give you the answer.
assigns stocks a number from one to five based on each analyst's recommendation, then calculates the average to show how Wall Street analysts as a group rate a particular stock. A rating of five would mean every analyst that covers the stock loves it, while a rating of one means every analyst hates the stock.
took a look at the 19 bank stocks in the S&P 500 to see how analysts rate them. Keep in mind that analysts may have a "sell" or a "neutral" rating on a stock even if they think a bank is wonderfully run, has great growth prospects, or is being too conservative in its estimates of what the loans sitting on its books are worth, if they think it is too expensive.
Also remember that analysts tend to be bullish as a group, mostly because they are afraid putting a "sell" on a stock may cause management to shut them out of the information loop. That may explain why the lowest-rated stock in the S&P 500, has a seemingly respectable score of 2.78.
Because that bank,
Marshall and Ilsley
( MI), is set to be acquired by
Bank of Montreal
, we struck it from our list. Marshall & Ilsley aside, then, here are the
A regularly talked-about acquisition candidate, SunTrust named a new CEO in April and more recently announced other changes to top management.
Sandler O'Neil analyst Kevin Fitzsimmons is one of the more bullish followers of the stock. He rates SunTrust a "buy" with a $34 price target. He argues SunTrust combines a relatively strong balance sheet with the ability to benefit from a recovering economy.
"While such a story may be a test of patience (based more on macro issues), we continue to believe
SunTrust is getting stronger with each quarter, and in the near-term, we see the credit leverage as a bridge (for tangible book value creation) until we get a more pronounced economic recovery," Fitzsimmons argues in an April 21 report.
Also, he notes that SunTrust is one of the few banks that has succeeded in growing its loan portfolio while reducing risk in more problematic exposures. Further, he argues that downside is limited, since SunTrust shares trade barely above tangible book value.
Headquartered in Winston-Salem, N.C., BB&T Corp is the 8th largest depositary franchise in America, according to an April 29 report from Stifel Nicolaus. Including its recent acquisition of Colonial Bank, BB&T has $157 billion in assets across 13 states and the District of Columbia. BB&T has top three deposit shares in North Carolina, South Carolina, Virginia, West Virginia, and is in the top 5 in Alabama, Georgia, Florida, Maryland, and Kentucky, Stifel notes. Through 2014, population growth within BB&T's markets is projected at 6.2% versus 4.6% for the U.S, and household income is projected to grow 4.3% versus the national projected growth rate of 4.1%, Stifel's report states.
Stifel analyst Chris Mutascio published a report Tuesday arguing investors should favor
"With the recent pressure on Wells Fargo shares due to decreasing mortgage banking revenues and the recent outperformance of BB&T shares due to the thought it might land an accretive acquisition of
Royal Bank of Canada
's U.S. banking operations, we think the market has priced in too much of a disparity between the franchises," Mutascio writes.
Hudson City Bancorp
FBR Capital Markets analyst Bob Ramsey wrote in a recent report that "Hudson City's greatest opportunity," may be a diminished role for government sponsored entities
, as those lenders are able to offer mortgages at rates with which Hudson City can't effectively compete.
However, FBR analysts aren't convinced policy makers are ready to scale back Freddie and Fannie's role in the mortgage market any time soon, however much they might like to do so.
"Policy makers are eager to put an end to the government's subsidy of housing, but seem less comfortable with the likely implications: highernear-term interest rates, a significant decline in 30-year fixed-rate financing, and further pressure on housing prices. As long as the GSEs keep 30-year fixed-rate mortgage rates low,Hudson City should be challenged to grow or earn enough spread to manage its interest rate risk," FBR's Ramsey wrote in an April 21 report.
Sandler O'Neil analyst Kevin Fitzsimmons left his recommendation unchanged at "hold," in an April 19 report.
He stated he was "incrementally encouraged" by Regions' second straight quarter of profitability and what he termed a "substantial improvement" to the rate at which the bank has been reporting non-performing loans.
Fitzsimmons also noted "signs of life," in the demand for commercial loans and improvement in Regions' net interest margins, which the analyst describes as "below-peer." He also cited "good cost control," in the report.
Still, Fitzsimmons argues "the upside to the shares will be fairly limited." He cites a "still-elevated" level of non-performing assets, and what he believes will be a long wait before those assets are repaired, sold or written off.
Fitzsimmons has a $7.50 price target, which versus the $7.04 level at which Regions Financial shares were trading late Tuesday morning. Regions has often been floated as a potential buyout target, and excitement over this prospect appeared to be behind a big run-up in the shares in late 2010 and early 2011. So far, however, no deal has materialized, and the shares have drifted lower in recent months.
Deutsche Bank analyst Matt O'Connor has a "hold" on KeyCorp and a $9 target price.
"Credit trends have improved sharply--and further declines in charge-offs/nonperformers are expected," he wrote in a May 6 report following a visit to company headquarters.
O'Connor also believes KeyCorp is less exposed than many other banks to continued weakness in the housing market and he argues management is doing a good job keeping expenses under control.
However, O'Connor sees loan growth as a challenge for KeyCorp, given that it is winding down sizeable chunks of its portfolio. Further, O'Connor argues, when lending recovers, earnings on the banks' securities portfolio, which account for 27% of total earnings, are likely to decline.
One important issue for KeyCorp highlighted by O'Connor is what management does with "excess capital"--a figure O'Connor estimates will reach $3 billion by the end of 2012. He says management seems to prefer buying back shares as opposed to making acquisitions, and while KeyCorp executives say deals are expensive at the moment, O'Connor doesn't expect them to use the full $3 billion in excess capital for share buybacks, as he believes "management wants to balance buybacks with deals over time."
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Written by Dan Freed in New York
Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.