NEW YORK (
)--Despite a strong earnings season for banks--the best ever,
--there are still a few names Wall Street analysts love to hate.
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 18 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 2.75.
Here, then, are
Wall Street analysts still hate.
Analyst rating: 3.36
Biggest bears: Barclays analyst Jason Goldberg, Mike Mayo of CLSA and Chris Gamaitoni of Compass Point.
Suntrust's second quarter earnings of 33 cents per share compared to a 31 cent analyst consensus. A smaller earnings provision and stable net interest margins offset higher credit costs and a slightly reduced balance sheet, according to Barclays' Goldberg.
On the flip side, Goldberg argues "organic loan growth remains elusive," and net interest margins are "expected to come under pressure near term."
Goldberg noted Suntrust's new CEO and CFO and plans for a "new efficiency initiative," which "is expected to focus on centralizing and eliminating redundancy of similar functions across business lines."
He also expressed some skepticism, however.
"It wasn't that long ago that
Suntrust completed what seems to be a similar program," he wrote.
Goldberg, who has an "underweight" rating on Suntrust, contends the bank's targets of a 1.00% return on assets and 60% efficiency ratio "look to be below peers."
Biggest bears: CLSA's Mayo, Macquarie Capital's Al Savastano
BB&T earned 44 cents in the second quarter, slightly ahead of analysts' 43 cent consensus, however, as CLSA's Mayo points out, loan losses went up by 10% even though nonperforming assets (NPAs) declined. He points to the fact that foreclosed properties account for $1.2 billion, or roughly one third of the NPAs on BB&T's balance sheet.
Going forward, Mayo is looking for "lower margin and fees, mitigated by lowerexpenses and higher spread revenues." While maintaining his "sell" rating on the stock, Mayo upped his price target to $21 from $19, noting that revenues for BB&T have grown faster than for their peers.
Through mid-Thursday, BB&T shares were up just over 2% since it reported earnings last Friday, while the broader bank sector was slightly lower over the same time frame. While BB&T shares are essentially flat year to date, they have outperformed the sector.
Bearish analyst: Andrew Marquardt, Evercore Partners
Keycorp earned 25 cents per share in the second quarter, though Marquardt stated in a July 20 report that special items clouded the number somewhat. Core earnings, he wrote, were about 21 cents. He called the results "mixed," stating they demonstrated weaker than expected revenues despite strong credit and reduced expenses. A concern, Marquardt argues, is Key's ability to grow its loan book, especially in light of the fact that it still has a large group of loans it is winding down.
"While credit leverage continues to be notable, top line remains pressured and ultimate earnings power
is more uncertain than others," Marquardt concludes.
A more bullish take comes from RBC Capital Markets analyst Gerard Cassidy, who upgraded the stock to "outperform," on July 19, though he cautioned that if Keycorp "is unable to gain any traction with regard to revenue and earnings growth in the next two years" under new CEO Beth Mooney, it "may need to consider affiliating itself with a larger financial institution."
Keycorp shares have fallen more than 7% year to date and are at just over 20% of their pre-crisis highs.
Hudson City Bancorp
Analyst rating: 2.90
Bearish analyst: Jake Civiello, RBC Capital Markets
One of the better-performing bank stocks through the crisis, Hudson City has struggled over the past few months due to a wrong-way bet on interest rates and essentially being priced out of its main market--jumbo mortgages--when the conforming limit for
Civiello maintained his "underperform" rating and cut his price target to $8 from $9, "implying a risk of further balance sheet restructuring that could cause tangible book value to fall similar to the 1Q11 decline." Hudson City shares dropped sharply in the first quarter after regulators forced it to restructure its balance sheet to clear off $12.5 billion in debt.
"We believe the stock price will continue to stagnate at the present level as
Hudson City contends with its current situation, which we believe centers on an unsustainable long-term business model. As a result, in our opinion investors can find other names in the thrift space with better revenue generation potential, more diversified loan portfolios and less balance sheet risk from wholesale funding exposure," Civiello wrote.
Analyst Rating: 2.75
Bearish Analysts: Chris Gamaitoni, Compass Point Research & Trading; Jason Goldberg at Barclays
Regions was profitable for the third straight quarter as a result of cost cuts and securities and other gains, such as a $44 million tax benefit, Barclays' Goldberg notes in a July 27 report.
While Goldberg cited progress in shrinking non-performing assets, he is still worried about what the bank refers to as its "Investor Loan Portfolio"--a $13.4 billion portfolio of loans accounting for 17% of Regions' total loan book, where 9% of the loans are classified as non-performing.
"We expect this book, albeit shrinking, to weigh on provisions and profitability for the time being," Goldberg writes.
Keycorp acknowledged on a recent conference call with investors that it was the subject of a government inquiry into its accounting practices. The board is also pursuing an inquiry.
Goldberg has an "underweight" rating and an $8 price target on Regions.
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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.